Jim Daly (Cork South West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Ceann Comhairle's office for the opportunity to raise this important issue in the House this evening with the Minister. The issue does not affect most people. It does not have implications for them because, happily, they are not in flood-prone areas and they have no problem getting flood insurance cover. The Irish Insurance Federation recently informed a committee of the House that 98% of home owners are in the lucky position of being able to get flood cover. Only a minute percentage – approximately 2% - of people cannot get flood cover.

For those 2% of people who cannot get flood cover, the floods in June 2012 resulted in 1,260 claims totalling €54 million. A large number of claims were from County Cork, much of them in west Cork in the towns I represent such as Skibbereen, Clonakilty and Bandon, which all have a long and increasing struggle with floods. The towns have a history of flooding and devastation. A total of 627 households claimed a total of €15 million during a flood in 2012, which averages out at approximately €24,000 per household. Such an amount highlights the amount of damage an average house can endure during a flood event.

It is a huge trauma for an individual to have their home destroyed by water, but they have the double whammy of having to clean up their home, get the dirty, filthy brown water out of the house, have their privacy invaded, return to their home with massively increased premiums and then be denied future flood cover. People in the town of Clonakilty that I represent are literally living on their nerves since June 2012 due to the habitual flood warnings that occur. There is a flood warning every month and at this time of year it is every week. People put out sand bags but they do not have insurance. They dread the prospect of being revisited by the horror of their home being flooded.

I reiterate my call for a solidarity levy on home insurance policies. The people of this country would countenance such an idea. I expect the 98% of people who are fortunate to have home insurance would accept a levy of 1% or 2% per annum, which would amount to €8 or €10, to cover the 2% of people who are denied flood insurance by insurance companies. We have precedents in the area. In 1955 the Government led an initiative to work with insurance companies to introduce a private motor insurance scheme which offered cover for anybody who was the victim of a car accident where the parties involved were not covered by insurance. I have examined the many examples that exist, for example in the United States, where FEMA, the national flood insurance programme, operates in various states. In effect, it is a solidarity levy, which is accepted by people. In this country we recently accepted a 2% levy on health insurance policies in order to salvage the Quinn group.

I urge the Government to give serious consideration to working with the insurance companies. I am aware of the steps that have been taken to date, especially by the Minister of State, Deputy Brian Hayes, and the Office of Public Works, OPW, working with insurance companies. However, I would like to see the matter being taken a step further and for the Government to liaise with the industry to ensure an insurance scheme is introduced.

Alex White (Dublin South, Labour)
Link to this: Individually | In context | Oireachtas source

I thank the Deputy for raising this important issue. It should be noted that flood cover and its unavailability has been raised in this House on a number of occasions, not least by Deputy Daly and others. It is a subject with which I am most familiar. I am also conscious of the difficulties that the absence of such cover can cause to householders and businesses. The Deputy outlined them in his contribution.

The Deputy will be aware that the substantive issue of the provision of new flood cover or the renewal of existing flood cover is a commercial matter for insurance companies, which must be based on a proper assessment of the risks the insurers are accepting. These are often considered on a case by case basis and neither the Government nor the Central Bank has any influence over this matter. The Irish Insurance Federation, IIF, has advised the Minister that flood insurance cover is available to approximately 98% of householders in Ireland. It has indicated that when making underwriting decisions, insurers look at the claims history of the property and any flood protection measures implemented by the Office of Public Works, OPW, or local authority. As a result, some people will pay a higher premium because the flood risk is higher, or will have a higher flood excess on their policy. While insurers try to provide flood cover wherever possible, flood insurance is sometimes not economically viable, and in the interests of keeping premiums affordable for policyholders in general, the IIF says that insurers decline flood cover for new business for some risks or in certain cases have to withdraw flood cover at renewal.

The Office of Public Works is committed to doing all it can to alleviate the impact of flooding through the provision of defences and by taking steps to manage and reduce flood risk in the future through a strategic and sustainable approach under the national catchment flood risk assessment and management, CFRAM, programme. This commitment is underpinned by a very significant capital works investment programme which, along with expenditure on maintenance of arterial drainage schemes, will see up to €250 million being spent on flood relief measures over the next five years. The Deputy, in fairness, has also referred to the fact that various measures are being taken under the direction of the Minister of State, Deputy Brian Hayes, and his officials in the OPW, and there have been a number of meetings with the IIF about this matter and the various initiatives that are being taken.

The issue of a State indemnification scheme for those unable to obtain flood cover has been raised on a number of occasions. While it is difficult to quantify what the costs would be in a particular year, it is possible to say that the costs would be significant over a period of time on the basis of the eight major floods over the 12 year period, 2000 to 2012, costing the insurance industry approximately €700 million in flood claims. These costs are in addition to the normal infrastructure costs which arise from flooding such as repair of roads, bridges and so forth. Furthermore, if a scheme of this type was established, there is a danger that the industry would have a strong incentive to discontinue the provision of flood cover in medium and high risk areas, thus increasing the potential cost of the scheme over time. Therefore, such an arrangement has the potential to undermine the nature of the existing private insurance regime, making it difficult to withdraw it, even if was introduced on a short-term basis.

The approach being adopted by the Government to ensure the availability of flood insurance consists of continuing to prioritise spending on flood relief measures by the OPW and relevant local authorities, improving channels of communication between the OPW and the insurance industry on the effectiveness of these measures, and implementation of a comprehensive and strategic approach to flood risk management through the national CFRAM programme.

With regard to Deputy Daly's suggestion of the introduction of a regime similar to the Motor Insurers Bureau of Ireland, MIBI, system in respect of motor insurance, the problem with that proposal centres on who would fund such a scheme. Unlike motor insurance, flood cover is not a compulsory insurance system in this State, so there would be no basis for compelling the industry to contribute to an equivalent scheme for flood cover, as is done in respect of motor insurance. In these circumstances, the State would have to fund such an arrangement and it would, in effect, create a State indemnification scheme with major costs for the Exchequer.

Jim Daly (Cork South West, Fine Gael)
Link to this: Individually | In context | Oireachtas source

A cursory glance over the records of this House shows that this issue has been raised on an increasing number of occasions, and it has been raised many times in the past 12 months. Regrettably, the responses have not changed a great deal since early last year. That is a poor consolation and comfort to the people I represent in west Cork where there is a high concentration of people who cannot get insurance in towns such as Skibbereen, Bandon and Clonakilty and villages such as Rathbarry, Ballinascarty and Manch. These places experienced flooding over recent years.

The Minister referred to a cost of €70 million per year. I am referring to a solidarity levy shared by the approximately 2 million homes which were enumerated in the 2011 census. That would mean, at the most, between €30 and €35 per annum being contributed by each household as a solidarity tax. I do not believe it would require anything approaching the figure of €700 million to €800 million that has been paid out over the last ten years. When divided by ten, that figure is approximately €70 million per year. The figure I have in mind is €20 per household, and I believe people would contribute it. That would create a sufficiently strong fund. However, leadership is required. I call on the Government to get together with the industry. This has been done in the United States and there is no reason that it cannot work here. We just need the will to achieve it.

The representatives of the 98% of people who have flood insurance are fortunate enough not to be as anxious about this issue as those of us who represent the other 2%. The 2% is a tiny minority, but they are people. They live in houses that cannot be sold, they cannot move to other areas, they cannot upgrade or downgrade and they cannot get a mortgage because the banks will not give them one. These are real issues for real people about their homes. I plead with the Government to take leadership on this issue and make progress on it.

Alex White (Dublin South, Labour)
Link to this: Individually | In context | Oireachtas source

I do not believe I can add further to the reply I gave earlier. I acknowledge the strength of the arguments Deputy Daly has made and the undoubted frustration, and worse, experienced by his constituents when faced with these eventualities. Indeed, I am familiar with similar experience in other parts of the country, including in my constituency. Other Deputies will have experience of this also. It is real problem for people. The insurance system in place is essentially commercially based. People's properties are covered on the basis of an assessment of risk carried out on commercial principles.

Anybody would have sympathy with the point made by the Deputy in respect of people who cannot obtain cover. As to whether there would be a basis for going outside those commercial parameters through the State stepping in by way of a solidarity levy or otherwise, it is an interesting and compelling proposal. There has been much debate in the Houses about the property tax. I am not trying to say the two are the same but the question of solidarity, whether it is intergenerational solidarity in the area of health care or solidarity between people who live in different parts of the country and have different risks associated with their properties depending on the climate or where they live, is a good point and an interesting political question we might consider. On the issue of the insurance regime, however, I regret the answer is not very different from the answer given previously. Insurance cover for property is done in the commercial environment and I cannot really add more than what I have already said about the State's role in that regard.