Insurers count the cost of a week of global devastation

Even by the erratic standards we have come to expect of the British summer, this week's weather has redefined the adjective most commonly used to describe it: changeable.

As forecasters warned the South-west to prepare for more rain and high winds this weekend, the repercussions of the past seven days of violent weather were being felt across the country, and the economy.

Insurers assessing the costs said it was the location rather than the nature of events that took them by surprise. "Flash floods are exactly what we would expect to see at this time of the year," Malcolm Tarling, of the Association of British Insurers (ABI), said. "Houses on flood plains or in areas prone to flooding will attract a premium, flash floods were by their nature unpredictable. We have always had them and we always will." The more pressing problem is how to accommodate climate change into the industry's long-term planning. "What we would like to be able to do is predict with some degree of accuracy our changing weather patterns so that we can set premiums," he added. "That is becoming increasingly difficult."

A Changing Climate for Insurance, published by the ABI in June, reported that during the 1990s there were 34 months of severe weather, compared to an average of just 12 months in previous decades. Weather-related claims doubled in the period from 1998 to 2003 compared to the previous five years.

Martin Scott, head of home insurance at Churchill, said: "Claims are currently running five times higher than the average week."

Hurricane Charley, which devastated parts of Florida, is likely to prove far more expensive for UK insurers than the flooding in Cornwall and Scotland. Lloyd's of London said it did not know precisely how much it would cost the market, but estimates have put the total cost at between £6bn and £10.7bn, making it the second biggest bill for a storm.

Other sectors of the economy have also been feeling the chill. The retailer JJB Sports reported last week that profits were likely to be 20 per cent down on expectations because the weather had hit sales of summer clothing. Cycling, tennis and golf equipment had been left on the shelf. Nestlé and Carlsberg have also downgraded profit predictions, blaming the weather for poor sales of ice cream and lager.

David Southwell, of the British Retail Consortium, said: "The weather has a huge impact on the things we buy and when. You are hardly likely to buy a pair of open-toed sandals when it's pouring. In early June when the weather was good, you were seeing decent sales of barbecues and fridges. But by the end of the month, it was DVDs and tumble-dryers."

Bookmakers, by contrast, are enjoying a relatively pain-free summer. Last year they had to pay out to punters who correctly predicted the mercury would touch 100F. Now "the high-temperature bets have gone cold", Graham Sharpe of William Hill said.