A new analysis by UK parametric insurer FloodFlash has revealed in detail the flood risks facing businesses. According to the study the biggest risk may be one the businesses have not even considered.
The 2022 Commercial Risk Report by the insurer provides an up to date view of the flood data and says that the average cost of flood damage in a commercial setting is around £80,000 ($95,875). Meanwhile a small business can lose up to 50 working days following a flood event, which clearly leads to a loss of custom and orders, puts shipments on hold and impacts organizational reputation deleteriously.
Based on the analysis which was conducted for the businesses in Britain, the top five flood risk facts that the businesses simply cannot afford to ignore are:
1. 40% of small businesses close for good after catastrophic flooding. According to the analysis, 52% of small businesses say it would take at least three months to recover from a disaster but 90% of smaller companies fail within a year unless they can resume operations within five days following a disaster.
2. 27% of commercial properties are at risk from flooding, twice the rate of flood risk facing domestic properties. For around half of those business, the picture is even worse – 14.4% of commercial properties (one in eight) is subject to significant flood risk, while a total of 18% face a moderate risk.
3. Of the commercial properties at risk from flooding, 80% are at risk from surface water. Surface water flooding, or ‘flash flooding’ happens when intense localized rainfall quickly saturates the ground, preventing it from soaking away, and overwhelms drainage systems and the results can be catastrophic.
4. Retail and industrial properties make up over half of those facing flood risk. Retail is the most at risk sector, making up nearly one third (32.5%) of the commercial properties at risk and 58% of retail companies report that they don’t have comprehensive insurance cover for flooding in place.
By contrast, while manufacturing, wholesaling, and logistics properties account for more than 20% of those at risk, 76% of these companies report that they do have comprehensive insurance, including flood cover.
Office-based businesses represent the third most at risk sector, making up around 10% of those at risk – and, here, around half of those business say they are insured against flooding.
5. Nearly half of the businesses flooded in the past 10 years experienced a period of business disruption. The interruption of normal business operations is one of the most damaging aspects of a flood event.
The study found that overall, just 35% have developed comprehensive flood resilience plans and less than half (42%) have in place the business interruption insurance that – with the right level of cover in place - can play a very vital role in strengthening flood resilience by helping the business to recover quickly, covering unexpected costs (from replacing equipment and stock to re-wiring and refitting), and replacing lost income.