Tuesday, 16 April 2019

Questions (135)

Tony McLoughlin

Question:

135. Deputy Tony McLoughlin asked the Minister for Finance the negative effects the insurance industry here is likely to face from climate change; his views on whether the changes to climate policy in accordance with the UN Paris Climate Agreement will mitigate against these concerns; if consideration has been given to the fact that persons may have to pay more for insurance policies due to climate change; the measures that can be introduced to address same; and if he will make a statement on the matter. [17230/19]

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Written answers (Question to Finance)

The negative effects of climate change on insurers globally, in the form of more frequent and severe storms, floods and droughts, is well documented both in terms of increased payouts and the impact on insurers investment portfolios. In a recent presentation in relation to Climate Change and the Irish Financial System, the Central Bank of Ireland has noted that there has been a tripling of weather-related insurance events since the 1980s with annual average insurance payouts increasing from $10 billion to $55 billion.

Primary responsibility for Ireland’s response to climate change rests with my colleague, the Minister for Communications, Climate Action and Environment, Mr. Richard Bruton TD. Recently, the Government has given approval to Minister Bruton to develop an all of Government plan (the All of Government Plan on Climate Disruption) which will set out the actions which must be taken to make Ireland a leader in responding to climate change. Minister Bruton will work with colleagues across Government to develop new initiatives across a range sectors and my Department is likely to contribute to this exercise in relation to the issue of the availability and cost of property insurance cover.

It is important that all parties to the UN Paris Climate Agreement, including Ireland, tackle climate change in line with their commitments. Meeting these targets is critical as part of the global effort to limit the extent of climate change. My officials have consulted with Insurance Ireland in relation to the Deputy’s question and they share this view, highlighting the importance of mitigating the effects of climate change through public investment in improving infrastructural resilience, as weather events become more frequent and severe and more costly weather-related losses are being observed not just in Ireland.

In relation to improving infrastructural resilience, the Deputy should note that the current core strategy for addressing areas at potentially significant risk from flooding is the OPW Catchment Flood Risk Assessment and Management ("CFRAM") Programme. The CFRAM Programme focussed on 300 Areas for Further Assessment ("AFAs") including 90 coastal areas, mainly in urban locations nationwide, identified as being at potentially significant risk of flooding. The proposed feasible measures, both structural and non-structural, identified for AFAs are outlined in Flood Risk Management Plans. The Plans set out the flood relief schemes that have already been constructed and those that are currently underway. The Plans also provide the outline of 118 proposed schemes that can protect a further 11,500 properties and the evidence to prioritise their delivery to where its benefit is greatest. OPW have informed us that they and Local Authorities will work closely together on the all of the projects to ensure that they are all implemented in the lifetime of the Programme.

In conclusion, I believe the Government’s extensive flood defence programme demonstrates its commitment to trying to minimise future flooding and thus ensuring that insurance  cover remains available at affordable prices. However, you should be aware that the provision of insurance is a commercial matter for insurance companies, which has to be based on a proper assessment of the risks they are willing to accept. This assessment will in many cases include insurers own presumptions based on their private modelling and research. Consequently, neither the Government nor the Central Bank can interfere in the provision or pricing of insurance products or have the power to direct insurance companies to provide flood cover to specific individuals or businesses. This position is reinforced by the EU framework for insurance (Solvency II Directive) which expressly prohibits Member States from doing so.