The Department of Finance carried out a review of policy in relation to flood insurance in 2016, which formed part of the Interdepartmental Flood Policy Coordination Group Interim Report, as approved by Government in November 2016. As part of the review, the Department examined a number of possible approaches including approaches in other jurisdictions. This work included examination of an insurance pool option which would involve setting up an insurance pool financed by an agreed percentage of insurance premiums being paid into it similar to Flood Re in the United Kingdom.
The first point to note is that the Flood Re model is basically an insurance scheme underwritten and administered by the industry which the UK Government helped establish. My Department has had some discussions, with the Irish insurance industry about an equivalent arrangement and they have made it very clear that they do not think it is feasible in an Irish context.
In addition it was concluded that even if industry were willing to participate, the State would have to be prepared to provide financial support in circumstances where the claims were above the level covered by the pool as it is unlikely that there would be sufficient capacity in the Irish reinsurance market to cover this extra amount. This is unlike Flood Re which uses a reinsurance backstop which is facilitated by the fact that there is a liquid reinsurance market in the UK. It is important to note also that certain significant exclusions apply in the UK scheme, such as small businesses and houses built after 2009.
In summary, the Department’s review concluded that the approach of an Insurance Pool with State indemnification would lead to additional levies being imposed on all household insurance policies at a time of increasing insurance costs, and could potentially lead to a considerable financial exposure to the State in the form of a State backstop.
The Government continues to believe that its existing policy and investment in relation to flooding which is focused on the development of a sustainable, planned and risk-based approach to dealing with flooding problems is the best way forward. This commitment is underpinned by a significant capital works investment programme by the OPW and Local Authorities, complemented by the exchange of information with the insurance industry on completed flood defence schemes. This approach should lead to the increased availability of and lower cost for flood insurance and further improve the already high level of coverage in this country compared with many other jurisdictions.