Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I move amendment No. 1:

To delete all words after "That" and substitute the following: "Dáil Éireann resolves that the Flood Insurance Bill 2021 be deemed to be read a second time this day twelve months to allow for further consideration of the Bill including an updated regulatory impact assessment; and for alternative methods to meet the policy objective of the Bill be assessed, given the legal concerns of the Bill, for current initiatives underway to progress and developments in the wider insurance reform agenda and European Union and Organisation for Economic Co-operation and Development policy space to evolve.".

I thank Deputy Brady for bringing forward this important legislation. I totally support the sentiments behind protecting homeowners and trying to make sure everybody has home insurance, irrespective of the area in which they live. It is important in respect of this Bill and what it attempts to do to think about the role of the State - what it is and is not. It is clear that the role of the State is to make sure that the infrastructure is in place to prevent flooding in the first instance and then make sure insurance companies provide insurance, as the Deputy described. The State's role is not to interfere in a market in a way that creates other problems. For that reason, I put forward a timed amendment for 12 months to allow us to discuss this a bit further. There is quite a lot of complexity in what the Bill suggests. I would like to go through some of that and then respond to some of the issues the Deputy raised.

The Department is not interested in receiving information from industry - the Deputy referenced the Central Bank's ongoing work in this regard. He will have some regard for the independence of the data from the Central Bank. I think we are on the same page in relation to that. On the technicality of the Bill, there is a problem from an EU law perspective and the Solvency II directive in particular. Ireland is part of the EU and part of the European Solvency II directive, which prohibits a member state from adopting rules which require insurance companies to obtain prior approval on special policy conditions and premium levels. There are EU-level problems with this Bill. More particularly, there are a few constitutional problems which I think are worth setting out. It speaks to the role of the State. The Deputy correctly said society depends on commerce and business as much as other things. Whether the Bill applies to insurance companies or any other sort of commercial organisation, when you take commercial risk assessment or commercial decision-making away from a commercial entity, which is sort of the point of the Bill in some respects, you interfere in its capacity for freedom to contract, to operate its business as it sees fit and to do so without a right of appeal.

This is a new standard in terms of intervention in a commercial market. This is a political choice. I appreciate that the Deputy is entitled to make that choice, but there is a broader read regarding what the State's role is in respect of intervening in commercial decision-making. It interferes straight up with freedom of contract and no right of appeal is provided. This could be provided for by means of amendment. There is, however, an access to justice issue for all persons, whether individuals or bodies corporate.

There are also several difficulties with the Central Bank and the Financial Services and Pensions Ombudsman. The Bill now gives them requirements and obligations to go beyond their current mandates. I do not know whether the Deputy has had an opportunity to consult with both of those organisations in terms of what their view might be, but this would require, at a minimum, legislative change, never mind policy change. The European Central Bank, ECB would also have to be consulted in this regard.

There is also a broader set of unintended effects I believe. I appreciate what the Deputy is trying to do, and I agree with him in respect of ensuring we have insurance for all homeowners. This is the essence of what he is attempting to do, and I totally agree with this aim. We must, though, approach this in a way that does not create unintended effects for the operation of the market more broadly. Ireland remains a small insurance market. We want to have more insurers here, not fewer. We want to offer an operating environment where insurers will come into the market and we are having some success with this endeavour. We want to ensure and hold the feet of the insurance industry to the fire in respect of the provision of insurance, but we do not want to take legislative steps that demonstrate we are going to intervene in the market in a way that would make Ireland unfriendly to the exercise of commercial activity in the insurance sector or any other sector. Several unintended spillover effects, therefore, must be acknowledged when the State starts to intervene in commercial assessments.

These are just some practical difficulties with the Bill. Nevertheless, I agree with the purpose of the Bill and the work that has gone into it. It is worth considering the broad genesis of this legislation and the work that has gone into it, as the Deputy has referred to. There was a Private Members' Bill in 2016, and a considerable regulatory impact assessment was done in 2019. The Dáil then fell, as did the Bill in question. That happens. The context has changed considerably since then from an international perspective as much as from a domestic one. It has changed in respect of pricing and the level of collaboration in the EU and international contexts regarding intervening in climate change and climate insurance. It is well worth having a fresh regulatory assessment undertaken now some four years from that previous work to reflect these different circumstances. We also had the Central Bank analysis in 2021. Additionally, as the Deputy referred to, considerable work has been done by the Office of Public Works, OPW, on demountable defences.

We have also got new information on the areas that may very well be at risk. The Deputy referred to a number of areas in his constituency. I also have some in my constituency, including at Sandycove and Newtownsmith. I have spoken to Councillor Aoibhinn Tormey in Sutton, which is another area at considerable risk in this regard. Those areas, however, are themselves changing and evolving and it is therefore well worth considering a detailed regulatory impact assessment now, which would provide better analysis, based on the information we have now in 2023 compared with what we had in 2019, on several different points.

Regarding the OPW and Insurance Ireland work that is ongoing, the OPW, as the Deputy is aware and as he referred to, is engaged in a substantial body of work in relation to this issue. It is working with Insurance Ireland to provide information in this regard. The Deputy is quite correct about this. There is a working group, which has now been expanded to include representatives of local authorities as well. This is to ensure there is a better local understanding of the local situations and how to make progress in this regard. I refer to where the priorities should be. The OPW has recently provided Insurance Ireland with detailed information on the various types of demountable defences and the engineering work involved in this regard.

There is some positive news in respect of there now being a progression of a service level agreement, SLA, for the defences in Mallow, for example. This SLA will bring assurance regarding the operation and governance of those defences. This should, I believe, result in insurers being more comfortable providing cover in these areas. It goes much further, however, than being comfortable. It is not really about being comfortable. This is the context in which I went back to what the role of the State is and what it is not. The State has a responsibility in respect of the construction of the infrastructure. It is the State's responsibility to also ensure, as far as is commercially possible without breaching EU law, that there is no excuse for an insurance company not to provide cover of the kind we are talking about.

This is why I would like to have the 12 months to discuss this matter further. How far can we go without intervening in a commercial market and having broader impacts? I refer not only to the breach of EU law but to the broader effects in terms of commercial operations in this State that I do not believe the Deputy wishes to bring about more broadly. This is why I am suggesting a timed amendment regarding this aspect. I assure the House that this message is constantly being strongly impressed on the insurance industry by me and the Minister for Finance, Deputy Michael McGrath.

It is well worth looking at the Central Bank's most recent flood insurance survey. This stated that insurers nationally responded to the effect that 97% of all property insurance policies include flood cover and that this represents the baseline national coverage level. The survey then examined flood-protected areas to compare these to the baseline national coverage level. Within the areas covered by 18 OPW flood defence schemes, both fixed and demountable, the results were that 92% of policies had flood cover in areas covered by fixed flood defences, 72% of policies had flood cover in areas protected by demountable flood defences and 81% of policies had flood cover in areas protected by both fixed and demountable flood defences. The OPW and the Department of Finance have agreed on the principles of baseline flood cover ahead of schemes being completed. This aims to provide before and after flood insurance to allow a small group of communities to be protected in future. It will also allow us to spot difficulties much more quickly.

In April, a survey was carried out by Insurance Ireland with a pilot group of three schemes in the Bray, Fermoy south and Dodder areas. The results, which we are still considering and I do not want to tell the Deputy that these are confirmed, were that 81% of policies include flood cover for these groups. I must emphasise that there are complexities with these figures and we are continuing to work on them. Nevertheless, I do wish to provide the most up-to-date information to the Deputy. Work is continuing with Insurance Ireland and the Central Bank to ensure we are assessing these figures correctly and we are monitoring the provision of flood cover to the widest extent possible.

In addition, wider than the specific issue of flood cover is the impact of climate change on insurance more generally, on the associated costs of this, how reinsurers and underwriters are considering climate change more broadly and how this impacts on Ireland. It is certainly the case that insurance is considered on a more global scale than just provision in our market. Reinsurers are pricing into the market major climate events that happen, for example, in France or Germany. This development is having an impact more broadly on the costs provided to insurers in Ireland. This is a significant element, and it will become even more significant in the future. We have the question of the insurance protection gap in the context of climate events. This is not just an issue in Ireland. There is a broader read across in this regard as well, as I know the Deputy understands.

The important policy issue now, in addition to the specific issue relating to the Bill, is the subject of consideration at the EU and international levels. This is alongside the Central Bank and the Department of Finance actively engaging on this issue. I could set out the Government's policy on flooding, but the Deputy has already done this amply and I do not wish to take up his time by simply repeating it. I might address any further questions in my summing up if that is okay with the Deputy.

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