Direct Line to spend entire £55m weather budget on Beast from the East insurance claims

Insurance company's shares fall 3% as weather-related claims jump

Despite the £55m hit, chief executive Paul Geddes said the company would hit financial targets for the whole year (PA)

Direct Line said the Beast From the East has already cost it £50m in additional claims, and will take up its entire £55m annual weather budget once all claims are processed.

Freezing temperatures and heavy snow caused damage and disruption across the UK that caused a sharp rise in claims during February and March, the insurance company said.

Despite the £55m hit, chief executive Paul Geddes said the company would hit financial targets for the whole year.

Investors appeared less sure, with Direct Line’s shares falling 3 per cent on Wednesday morning.

Mr Geddes said: “The freezing weather earlier this year hit many drivers, households and businesses hard, and I am proud of the way our people helped our customers during this difficult period, demonstrating the value of our insurance cover and service.

“We estimate the claims associated with the major freeze event will utilise the group's full annual weather budget.”

Gross written premiums fell 5 per cent to £769.9m in the first quarter, as partnerships with Nationwide and Sainsbury's ended. Across its own brands, premiums rose 4.7 per cent to £530.5m. The number of in-force policies fell 2.2 per cent to 15.5 million.

Richard Hunter, head of markets at Interactive Investor, said the company was in an “uncomfortable position" now that the weather budget had been used up.

“Meanwhile, price competition within the industry remains at a heightened state and the decline in gross written premiums is something of a setback, as evidenced by the initial share price reaction,” he said.

Reinsurance companies, which effectively insure the insurers, have warned the industry to expect more claims as climate change increases the likelihood of extreme weather.

Across the Atlantic, the US hurricane season was the most damaging on record as Hurricanes Harvey, Irma and Maria (HIM) battered the US in the second half of 2017 while further severe storms hit again in February and March this year.