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Despite massive damage, UK flood losses ‘manageable’: Fitch

Severe U.K. winter floods and storms will cost insurers around £1.2 billion ($2.0 billion), but the hit to the sector's earnings will be "limited", Fitch Ratings said on Monday.

Flood warnings are still in force across England, particularly in the south, following the country's wettest January on record.

On Monday, Somerset in the south west was still subject to two "severe" flood warnings — implying "danger to life" — along with 40 flood warnings and 174 flood alerts across the country. As of a week ago, 2,600 homes had been flooded since the start of January, and a further 7,000 had been cut off by flood water or lost access to services.

Peter Macdiarmid | Getty Images

However, Fitch forecast that losses to insurers who underwrote household and commercial properties in the U.K. would be "manageable".

"The agency expects a limited negative effect on the sector's earnings. This view recognises that the insurers are typically large, well-diversified players with the ability to offset losses through other profitable lines and to capitalize on price increases post-event thanks to strong capital levels," said Anna Bender and Martyn Street in a research note published by Fitch on Monday.

Major property underwriters in the U.K. include RSA, U.K. Insurance Limited, Aviva, Axa U.K. and Allianz.

(Read more: Insurers braced as Britain battered by storms)

"Insurers with a significant amount of personal property business will be most affected by the weather-related events. Significant damage to commercial areas was limited at the date of publication of this report," noted Bender and Street.

They added that they expected insurance claims from the current storms to remain well below the £3 billion seen after the 2007 summer floods. In 2007, England and Wales experienced the wettest conditions in 200 years and nearly 50,000 households were affected.

(Read more: Massive storm aims for winter-weary US East Coast)

But earlier this month, Richard Holt of Capital Economics warned that the economy could be particularly hard hit by the current floods, because they had hit the U.K.'s "economic heartland", which account for 13 percent of the economy.

Holt warned that the current storms could knock more than 1 percent of 2014's economic growth.

"What is very unusual about this particular episode is that the hardest hit part of the country has been the Thames Valley and the M4 corridor (the area that extends from west London towards Swansea in Wales), so that's high technology companies, life sciences companies," Holt told CNBC.

"We don't know how many of those companies have been affected — there really is very little information — but it the absolute core of the U.K. economy in terms of growth."

—By CNBC's Katy Barnato. Follow her on Twitter: @KatyBarnato

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