Seanad debates

Wednesday, 12 February 2014

5:00 pm

Photo of Colm BurkeColm Burke (Fine Gael)
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This matter was already discussed today with the Minister of State at the Department of Finance, Deputy Brian Hayes. I submitted this matter on the Adjournment last week when I was not aware that a debate on flooding would be on the Order of Business today. I have said three or four times in the past week that the Motor Insurance Bureau Fund is available to compensate an uninsured person involved in a road traffic accident but unfortunately we do not have a similar facility for people who have insurance for a residence or commercial premises but cannot get insurance cover for flooding. We will have to deal with this problem. I have studied the UK structure which costs approximately £10.68 per insurance policy to create the fund. There are at least 1.6 million premises insured in this country which could contribute €5 each.

The money should not all come from the insurance industry but Government should work with the industry to create and build up that fund. We do not get severe weather conditions every year but if there is a gap of three years the fund would be quite substantial. We should consider this and plan for the long term. I would like the Government to engage with the insurance industry. It is engaging in respect of other matters. This is an extremely important matter. I have come across some extremely difficult cases, for example, one in which there was subsidence and the people had not renewed the insurance policy because they were away on holidays. When they came back the insurance company said it could not renew the policy and the people are left with no insurance on their house. We should consider this. The insurance industry is making good money out of building and household insurance. We should work with it to make long-term plans.

Photo of Ciarán CannonCiarán Cannon (Galway East, Fine Gael)
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I am taking this Adjournment matter on behalf of my colleague, the Minister for Finance, Deputy Noonan. I thank Senator Burke for raising the issue. I am more than familiar with the challenges he has described. My own area of south Galway was devastated by flooding in 2009 and is well on its way to being equally devastated now. I have met many families who, since 2009, have found it impossible to secure insurance for their property.

The Government is fully briefed on a daily basis on the effects of the current severe weather and only yesterday agreed to make up to €70 million available for a programme of repair and remediation works. The Department of the Environment, Community and Local Government is the lead Department for coordination of the response. Funding for storm damage repairs has been agreed via that Department, together with the Departments of Transport, Tourism and Sport, and Agriculture, Food and the Marine. The local authorities affected will prepare and deliver programmes and schemes in their areas.

The Office of Public Works has a major role in overseeing flood relief works and the Department of Finance has, among other things, overall responsibility for insurance policy. As part of this, the Minister for State at the Department of Public Expenditure and Reform with responsibility for the Office of Public Works, OPW, has taken the lead role in continuing discussions with the insurance industry about improving the provision of insurance cover in areas where remedial works are being carried out and the OPW has put in place a regular and structured communication process with the Irish insurance industry to ensure a regular flow of information to insurance companies assessing the risks of flooding to homes and businesses.

The Government is familiar with the question of availability of flood cover for households and commercial premises in flood prone areas and Government policy in relation to this involves prioritising spending on flood relief measures by the OPW and relevant local authorities to address those areas of greatest need including areas where industry finds it most difficult to provide cover so that flood relief programmes can have maximum impact, where economically feasible.

It is about improving channels of communication between the Office of Public Works, OPW, and the insurance industry, with the objective of ensuring that appropriate and relevant information on completed OPW flood defence schemes is provided to insurers to facilitate, to the greatest extent possible, the availability to the public of insurance against the risk of flooding. It is also about providing humanitarian assistance under a new Department of Social Protection humanitarian assistance scheme, which has been allocated of up to €25 million to provide means-tested financial support to people who have suffered damage to their homes as a result of the flooding. This is a co-ordinated whole-of-Government approach led by the OPW, with relevant local authorities and other bodies, to maximise the level of resources available to address flood relief works. As a result of the cost and scale of these types of flood defence works, it is an approach which will see benefits over the medium and long term.

The House will be aware that the provision of new flood cover or the renewal of existing flood cover is a commercial matter for insurance companies, which is based on an assessment of the risks they are accepting. Flood cover claims are generally significant and in order to provide such cover, insurance companies would indicate that they must be satisfied that the potential for such floods arising is low. If, for example, an insurance company believes that flooding is likely to happen on a regular basis, such as every ten years, the company will reasonably argue that we are moving out of the realm of insurance, the purpose of which is to provide protection against the possibility of an event arising, into the area of certainty, where there is little doubt because of local geographic circumstances that flooding would happen on a regular basis. The recent discussions referred to earlier between the OPW and Insurance Ireland to agree on a sustainable system of information-sharing for completed flood alleviation schemes are nearly complete and should make more information available to the insurance companies.

I will turn to the question of setting up an insurance fund to pay for households and businesses which cannot currently get insurance for flood damage. The Minister for Finance considered this and a number of issues arise, particularly who would fund such a scheme. Unlike motor insurance, flood cover is not a compulsory insurance and there would be no basis for compelling the insurance industry to contribute to an equivalent scheme for flood cover. In these circumstances, the State may have to fund such an arrangement and it could in effect create a State indemnification scheme with major costs for the Exchequer. The House will be aware that in assessing options such as this, care needs to be taken that the proposed solution does not put in place arrangements which, over time, would weaken the provision of insurance cover by the market with possible negative long-term consequences for the economy. Any option that requires the State to make a significant contribution, given the current economic and financial position, would not be pursued without extensive examination, including cost-benefit analysis. Such a scheme would also need to be legally sound and proportionate and in line with prudential and solvency rules which govern how insurance companies should be run.

As part of the response to the recent flooding events, the Department of Finance is undertaking a review of the availability of flood insurance cover. It is also looking at developments elsewhere. When the review is complete it will be examined by the Minister who will report to his colleagues on what measures, if any, are needed to improve the availability of flood insurance cover.

5:10 pm

Photo of Colm BurkeColm Burke (Fine Gael)
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I thank the Minister of State for the comprehensive reply. I am not trying to impose an obligation on the State but rather more co-operation between the insurance industry and the State, which has happened in the UK. Could we consider what happens in the UK and see if we can implement similar measures? Comprehensive cover is not provided for everybody but there are particular cases where it is clear there must be some kind of security in place.

Photo of Ciarán CannonCiarán Cannon (Galway East, Fine Gael)
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Having seen the devastation wreaked on houses and farms in south Galway, as well as the severe difficulty which some people find in establishing an insurance policy after such flooding, it is important that the State should extend a hand of solidarity and do all in its power to ensure that some kind of insurance cover would be made available to the families and landowners. That engagement between the State and insurance companies is ongoing and as the Senator suggested, we are considering development elsewhere, such as in the UK and other jurisdictions where similar schemes have been put in place. I hope to employ every option and opportunity available to us to address the challenge in future.