Mr. Michael Lyons:

Our members work in both the public and private sectors. The PI insurance issue affects those in the private sector immediately but the crisis will have adverse implications for the public sector, particularly when it comes to delivering housing completions. Those engineers having PI insurance would include sole traders and fire safety engineering practices with three to four engineers, up to practices with over 20 to 30 employees. Generally, engineering practices would typically carry out fire safety design, inspections and certification of fire-resisting construction, fire safety systems, electrical and mechanical systems for fire detection, emergency lighting, smoke control and active fire suppression. Activities requiring inspection and certification include the construction of fire-resisting floors and external walls in houses and smoke detection systems in houses as well as specifying proper materials on cladding systems, wall and ceiling linings. All such design and construction is required to comply with Ireland's building regulations for fire safety. It should be noted by the committee that 12 years of PI insurance cover is the norm when a collateral warranty is in place. This requires that a practice be able to renew its PI insurance cover for each of the succeeding 12 years.

In respect of PI insurance in 2021, insurance underwriters, which are mostly UK-based, have withdrawn from the Irish market.

The amount of capital to cover PI insurance claims has reduced, precipitating a prohibitive and exorbitant rise in premiums, excess and the imposition of more restrictive terms, including the exclusion of covering fire safety-related work. The high levels of PI insurance required as part of procurement contracts and the multiple risks involved mean that cover is replicated and risk is pushed down the insurance supply chain. As a result, many engineering practitioners are finding it increasingly difficult if not impossible to obtain cover at reasonable costs. Some fire practitioners are being refused cover or are just not quoted. Many are only being offered policies with fire safety being excluded from cover and policies are offering much lower limits on individual and aggregate claims.

If the current trend persists, after a year of restrictive renewal notices, there will be relatively few firms in a position to offer fire safety certification for design and construction. This will impact on all of the construction industry, on the approval of designs, on the commencement of projects or on the handover of completed projects such as housing, flats, nursing homes and factories.

PI insurance premiums are priced on a number of factors including the practice’s turnover and the values of projects that the firm is involved with. The culture of below-cost tendering, inappropriate risk transfer and costing in tenders directly impacts on the estimated level of capital required in the PI insurance market. The underwriting of the insurance industry in Ireland is Anglocentric. There are impacts from Brexit but also from contagion due to developments in the UK market, for example, the liquidation of Carillion in 2018 and the Grenfell Tower fire in 2017.

In conclusion, Engineers Ireland has been raising this issue along with our colleagues in the Construction Industry Council. We welcome the attention that the committee is giving to PI insurance and we look forward to working with the committee, the Government and other stakeholders towards a solution or solutions. I thank the committee.