Dáil Éireann Debate, Tuesday - 23 April 2024
217. Deputy Ivana Bacik asked the Minister for Finance his plans to reform flood insurance in Ireland; his views on insurance cover for persons living in areas with demountable flood defences; his views on legislating for compulsory insurance cover for those living in areas which are prone to flooding; and if he will make a statement on the matter. [18121/24]
View answerAs Minister for Finance, I have policy responsibility for the development of the legal framework governing financial services regulation, including for the insurance sector. In terms of the challenges associated with obtaining flood cover, please be aware that the provision of such cover is a commercial matter for insurance companies, based on an actuarial assessment of the risks they are willing to accept. As such, Government cannot interfere in the provision or pricing of insurance, or direct as to what cover is provided, as is reinforced by the EU framework for insurance (Solvency II Directive).
Current Government policy in relation to increasing flood insurance coverage is focused on the development of a sustainable, planned and risk-based approach to managing flooding problems. Accordingly, €1.3 billion has been committed to the delivery of flood relief schemes over the lifetime of the National Development Plan (NDP) to 2030. This will protect approximately 23,000 properties across various communities from river and coastal flood risk.
In terms of the outcome of the current approach to flood insurance, it should be noted that according to EU level data, Ireland has an above average rate of flood cover relative to the EU. However, it is acknowledged that some households are still experiencing difficulties, particularly in areas with demountable flood defences which require varying degrees of human intervention in their installation. Where Government has invested in flood defences the Government’s reasonable expectation is that the industry should improve the level of cover in areas where demountable defences exist.
In order to address the issue of flood coverage levels in areas with demountable defences, continued engagement with all relevant stakeholders is key. This is facilitated as part of the Memorandum of Understanding (MoU) between the OPW and Insurance Ireland. This sets out principles of how the two organisations work together to ensure that appropriate and relevant information on these completed schemes is provided to insurers to facilitate, to the greatest extent possible, the availability to the public of flood insurance. Under this arrangement, the OPW provide information on all completed flood defence schemes (including on demountable ones) to Insurance Ireland, the representative body of the insurance industry. In turn, its members take into account all of this information when assessing exposure to flood risk within these areas. Officials from the Departments of Finance; Housing and Local Government, along with other stakeholders engage constructively with this process on how the levels of insurance cover might be improved in areas where flood defence works have been completed.
Legislating for compulsory cover was previously considered by my Department in its review of flood insurance policy in 2016, and the ‘Public Consultation on Climate Change and Insurance’. It was found that such an approach would have limited impact on the availability of flood cover, as it would result, amongst other things, in insurers pricing prohibitively for high-risk properties, an increase in the pricing of low-to-medium risk properties and the risk that insurers decide to withdraw from the market.
Recognising that the long-term risk of climate change on insurers and insurability, the Department of Finance continues to monitor international developments, engage with the Central Bank of Ireland, the insurance industry and actively participate in cross-departmental working groups on insurance. It is important to note in this regard that the European Commission, IMF, EIOPA and the OECD are separately examining climate risk impacts for insurance and the concept of insurance protection gaps, with recommendations for policymakers to emerge in time. It is important that developments here align with those across the EU so the Irish market is not ‘out of step’ with others.
Finally, I and Minister of State Richmond, along with our officials, will continue to engage on all aspects of insurance reform, including flood cover issues. These matters remain a priority for this Government and efforts continue to be made to encourage a responsive approach from the insurance industry.
