The issue of flood cover and its unavailability in some instances is one with which I am familiar. I am also very conscious of the difficulties that the absence of such cover can cause to householders and businesses. While the lack of availability of flood insurance affects a relatively small number of people, the consequences for these people are serious should their house or commercial premises be damaged by flooding. However, neither I, as Minister, nor the Central Bank, have the power to direct insurance companies to provide flood cover to specific individuals. The issue of provision of new flood cover or the renewal of existing flood cover is a commercial matter for insurance companies, which is based on a proper assessment of the risks they are accepting.
Government policy in relation to flooding aims to address the underlying problem through appropriate remedial works where this is economically feasible. The Office of Public Works is committed to alleviating the impact of flooding through the provision of defences based on a comprehensive assessment of flood risk throughout the country and development of flood risk management plans for the areas most at risk under the National Catchment Flood Risk Assessment & Management (CFRAM) Programme.
This commitment is underpinned by a very significant capital works investment programme which will see up to €225 million being spent on flood relief measures over a five year period from 2012 to 2016. Works are completed on a prioritised basis. Once these works are completed the availability of flood insurance in affected areas would be expected to increase.
The Minister for State at OPW has taken the lead role in discussions with the insurance industry about improving the provision of insurance cover in areas where remedial works are being carried out and OPW is near agreement on a data-sharing platform which will facilitate the transfer of detailed information on completed OPW flood relief schemes on an on-going basis. This will allow the insurance industry to take into account the flood protection measures when assessing flood risk in localities where such flood measures have been completed.
The Government has previously examined the introduction of a scheme of State indemnification to protect householders who cannot obtain household insurance in respect of flooding from regular insurance bodies. However, at the time this approach was not considered financially viable because it is believed that over time it would distort the market and incentivise industry to discontinue the provision of cover in medium and high risk areas, thus making the cost of such a scheme prohibitive. Furthermore, consultations with the Central Bank have led to concerns that if a levy or charge was applied to households then such a scheme would be considered a State insurance company which would raise a range of regulatory and capital issues.
The Deputy will be aware that as part of the response to the recent flooding events, the Department of Finance is currently undertaking a review of the availability of flood insurance cover. When the review is complete, I will examine it and will report to Cabinet on what measures, if any, are needed to improve the availability of flood insurance cover.
The Deputy refers to the scheme proposed by the National Flood Forum. I am aware that the Flood Forum gave a presentation to the Joint Committee on Environment, Culture and the Gaeltacht on the issue of property insurance in March 2013. These proposals will be considered as part of the flooding insurance review.
The Deputy also refers to a reinsurance scheme whereby insurance companies could pool their flood insurance liabilities, similar to the temporary scheme in the UK known as Flood Re. However, the introduction of such a scheme would likely lead to a significant increase in household insurance premiums as those in low risk areas would be required to subsidise those in high risk areas. Furthermore, the Exchequer would also be required to provide financial assistance to such a scheme in circumstances where the claims were above the level of funds in the pool. I am continuing to monitor how the difficulties around the Flood Re scheme are being addressed in the UK.
In cases where individuals who are experiencing difficulty in obtaining flood insurance believe that they are being treated unfairly, they can contact Insurance Ireland which operates a free Insurance Information Service for those who have queries, complaints or difficulties in relation to insurance. Their service can be contacted at (01) 676 1914 or by email at info@insuranceireland.eu.
