At the outset, the Deputy should note that I am aware of the particular difficulties that Clonakilty faces and have been advised by the OPW that consultants have commenced work on an accelerated programme under the South West CFRAM study to assess the flooding situation in Clonakilty and to develop a preferred option for measures to protect the town to an acceptable level from river and tidal flooding. A Public Information Day was held on 16th March 2012 where the public were invited to provide as much information as possible to the consultants on the flooding events which have occurred in the town. The consultants work is expected to be finalised by summer 2013. The preferred option will then have to be progressed to a full scheme design followed by procurement of a contractor. All this will take some time, however pending this, the OPW has informed me that Cork County Council intends to proceed with interim works to provide some short term alleviation to the flooding situation, primarily focused on measures to improve the surface water drainage in the town.
On the issue of a national insurance scheme, it should be noted that this matter was considered by the previous Government, amongst other options, in the aftermath of the November 2009 flooding and a decision was made not to proceed with such an arrangement because of its significant cost and also because of the potential for regulatory issues with such a proposal. I have recently reviewed this matter and have decided against any further change of policy. Because the vast majority of people are able to obtain flood cover, any such scheme would almost certainly be confined to those areas where the insurance industry has withdrawn cover because of previous claims experience. Due to the limited population base, premiums would either be excessively high in an effort to cover the cost of claims, or the scheme would never be in a position to meet claims thus creating a large ongoing long-term exposure to the Exchequer. In addition an inevitable development from the introduction of such a scheme would be a combination of the withdrawal of insurance companies from high risk and medium risk areas where they currently provide cover (cherrypicking) and people in these areas faced with increasing insurance premiums deciding to discontinue cover on the basis that the state scheme would provide the necessary protection to them at a lesser charge (moral hazard) thereby increasing the burden on the State.
It should also be noted that from a regulatory perspective, the Central Bank has previously indicated that creating a State insurance company would raise a range of regulatory and capital issues and that such a proposal has the potential to distort the market and possibly could create state aid issues.
Finally, it is difficult to estimate what the cost to the State of such a scheme would be as weather events by their nature are unpredictable. However over the 12 year period 2000-2012 the Irish Insurance Federation has indicated that there have been eight major floods costing the insurance industry approximately €672m in flood claims. These costs to the State would be in addition to the normal infrastructure costs which arise from flooding such as repair of roads, bridges etc which the State as a matter of course looks after.
