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Scottish storm: Domestic insurers to have largest losses

Domestic household insurers are set to take the brunt of insured losses from the Scottish storm as PwC estimates it could plunge the country’s economy £100m into red...

09 Dec 2011 | Postonline

Mohammad Khan, insurance partner at PwC said although it was too early to say what the cost of damage would be, household claims would dominate insured losses.

"The insurance industry should step in to take most losses to household policies. These tend to come from damaged roofs, when tiles are displaced from high winds. Tree fall damage has also been a driver of losses in past events but this has predominantly been the case earlier on in the season."

He added: "It is hard to put a value on the potential cost of the damage as there have been few recent storm losses in Scotland to benchmark against. However, the buildings and structures in Scotland are generally more resilient to high wind speeds than in the rest of the country, so this should help reduce any potential costs.

"As is the case with most windstorms, the full extent of the damage can take a long time to unfold as it tends to be high volumes of low value claims."

PwC warned businesses closing doors early, power outages, road closures that delay or halt deliveries, and employees taking time off to care for children sent home from school will not help.

Even if the aggregate cost of bad weather over the winter does not significantly impact national and regional GDP, daily productivity losses are a direct cost to business.

Head of private business at PwC in Scotland, Caroline Roxburgh, believed while £100m a day seems a lot, there is some evidence that the historic impact of extreme weather on the economy has been relatively small.

"In 1963 for example- the worst winter in living memory - manufacturing output fell 7% in February, but there was actually no net negative impact on GDP because consumers and industry spent much more on heating making up the difference.

However she added for some businesses the losses they experience will be permanent.

"Retailers, who are already facing arguably the toughest trading conditions in recent history, will be particularly badly hit as Christmas shoppers stay at home at the most profitable time of the year for them.

"While some businesses may be robust enough financially to take the hit, others may well be teetering on the edge, and for them, a winter like last year may well push them over the edge."

James Crask, PwC business continuity expert has predicted the extreme weather in Scotland and the north of England would worsen and businesses that fail to prepare will find it difficult to keep their operations running without disruption.

"With key transport links closed, power lost, and the potential for large parts of the workforce and key staff to be absent for several days, businesses need to act now to ensure they can continue to deliver their most critical services."


Source: Postonline

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