Mr. Kevin Thompson:

On behalf of Insurance Ireland, I thank the Chairman and members of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, for the opportunity to contribute to its assessment of the Flood Insurance Bill 2016.

As the representative body for the insurance industry, our members underwrite the vast majority of flood insurance premiums in Ireland. Our members also have extensive experience of flood defence policies internationally and their interaction with insurance cover.

I will keep my remarks brief and cover the policy context of the current Government flood policy before addressing the Flood Insurance Bill 2016 directly. I will also provide members of the committee with a brief overview of how Insurance Ireland responded to Hurricane Ophelia. We will then be available to discuss these issues with the members present today.

Regarding the recent severe weather events, Insurance Ireland members, along with most other businesses nationwide, closed offices on Monday, 16 October for employee safety reasons. Claims management teams deployed their individual weather catastrophe plans. This included walking through first response procedures; refreshing claims handlers on those procedures; deploying telephony surge protocols and activating first notification of loss protocols, enabling claims personnel and customers to complete initial registration online. Staffing levels within the first notification protocol teams were closely monitored over the following days.

Insurers, therefore, undertook several measures to ensure policyholders and claimants were dealt with in a timely and efficient manner and are now focused on the resolution and timely payment of claims. It is worth noting that the majority of Ophelia-related claims are low value, where private dwellings were not rendered uninhabitable and therefore the need for interim payments did not generally arise. As expected, the majority of losses occurred in the south, with the following geographic spread observed to date: Cork, 30% claimants; Tipperary, 10%; Wexford, 7%; and Waterford, Limerick, and Kilkenny, between 5% and 6%.

Regarding policy and key trends, Insurance Ireland is committed to working with the Government, the Office of Public Works, OPW, and other agencies of the State to support the policy of a sustainable, planned and risk-based approach to mitigating flooding. Insurers play an important role in working with the Government and its agencies to help meet the needs of those who require flood insurance. Insurers want to underwrite risk and they want to broaden coverage and that has been borne out in recent years with 98% of home policies in Ireland having flood insurance. In 2014, Insurance Ireland signed a memorandum of understanding, MOU, with the OPW. At its core, this MOU creates a system whereby the OPW shares information on the defences it has completed, and Insurance Ireland members take this information into account when underwriting these risks and seeks to ensure cover in these protected areas.

Insurers work to a fixed one in 100 year standard of flood defences. Where defences have been completed to this standard in what are known as defended areas, coverage rates for flood insurance increased.

We would like to be clear about how we arrive at our figures. The only reliable measure on which we can collect data is the percentage of policies that have flood cover. This is the only reliable baseline data. There are a lot of properties which for any number of reasons are not insured and as such they will greatly skew the coverage rates. We believe the policy is working and, although it is gradual, progress is being made in a sustainable manner for both communities and insurers.

Regarding demountable defences, a key feature of the discussion on flood defences has been around the issue of demountable defences or schemes that have a demountable element. From an insurance perspective, the human intervention required to put in place flood defences is a key variable and one which is difficult to resolve. We accept, at this early stage in their cycle, that the OPW's demountable defences appear to be performing well. However, there have been a number of demountable failures in the UK in recent years. For example, in 2007, the Upton-upon-Severn demountable defences were not deployed in time due to the severe disruption of transport infrastructure caused by flooding. We had a similar instance in 2012 in Kempsey, Worcestershire, where a faulty sensor caused the failure of a demountable defence. The sensor had become waterlogged due to heavy rainfall and then two pumps that were designed to start automatically failed. Another example is York in 2015. Finally, a temporary steel defence was not erected in Llanrwst in Wales. We have also experienced this situation closer to home. In 2011, there was a failure to deploy a demountable defence for the River Dodder.

We have been working with the OPW and the Government to get to a place where progress can be made on the demountable issue. I am pleased to be able to update the committee that our discussions are making progress. Insurance Ireland has informed the OPW and the Department of Finance that the following detailed negotiations with our members agreed that once demountables defences are erected in a timely fashion and correctly installed, they offer the same protection and risk as fixed defences. The missing part of the puzzle is the human intervention to erect the defences. We are beginning to look at strategies to address the issue of human intervention. This is detailed work and needs to be progressed in a prudent manner to ensure insurance companies do not take on excessive risk that would undermine their solvency, this in turn is to ensure that they have sufficient revenues to meet the needs of their future claimants.

On the Flood Insurance Bill 2016, given the policy context and the current issues being worked through, it is our considered opinion that the proposed legislation will not achieve its stated aim of building coverage in defended areas. We recognise the concerns that exist in parts of the country where flood cover is not yet available. However, when looked at in national and international contexts, we have a sustainable model for flood protection that is linked to an appropriate national policy. The interdepartmental flood policy group stated last year that the current focus on prioritising flood defences in areas at risk and working with insurers through the OPW is the best approach The memorandum of understanding, MOU, is working. It is our firm belief that it will continue to work into the future.

Finally, there has been a lot of discussion about a national scheme similar to Flood Re in the UK. We caution against such an approach. Flood Re has estimated that the average cost to repair an impacted dwelling is between £20,000 and £45,000. In the UK Flood Re only applies to residential properties built before 2009. Also, in the UK, Flood Re covers approximately 2% of policies. It is our belief that the Department of Finance estimate that a Flood Re system would result in a levy of between 9% and 16% being imposed on every household policy every year is on the light side. It could easily be envisaged that such a levy could rise above 17%.

I thank the committee for the opportunity to appear before them today. We look forward to discussing the proposed legislation with members.