Joe McHugh (Donegal North East, Fine Gael)
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Question 151: To ask the Minister for Finance his views on rising home insurance costs; his further views on whether house prices and house rebuilding prices should at least partially determine home insurance premiums, together with market trends; if he agrees that costs should be kept to a minimum in the interests of taxpayers and unemployed homeowners who face a tough budget this winter; if he will engage with the Financial Regulator regarding same; and if he will make a statement on the matter. [42875/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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At the outset it should be noted that neither I in my role as Minister for Finance nor the Central Bank of Ireland can prohibit or restrict an insurance company from changing its annual premium rates, as this is a commercial decision for the company in question.

I am aware of increased pressure on insurance premiums in recent times particularly in the household insurance area. Much of this is due to the unprecedented level of claims which the insurance industry suffered last winter. The insurance industry estimated that between last November's flooding and the big freeze at the start of this year they have paid out about €550 million worth of claims. The industry has put the level of claims in further context by indicating that the insured cost of these two weather events exceeded the total cost of all serious weather events that have occurred in the last decade estimated at €358 million.

The question of house prices and house-rebuilding prices determining home insurance premiums is a matter between an individual householder and his or her insurance company. If a householder is of the opinion that the value of his or her house has changed when renewing cover, then it is a matter for that person to inform the company accordingly rather than the company to make this assumption and perhaps make it incorrectly. I have been informed that the Society of Chartered Surveyors have a guide to house rebuilding costs on its website, scs.ie, which anybody can use to establish what their rebuilding costs should be for insurance purposes.

As the Deputy is probably aware insurance costs must reflect the underlying risk - one of the factors which is previous claims history - because from a prudential perspective insurance companies are required by the Central Bank to meet their capital requirements on an ongoing basis in order to ensure the sustainability of their business. In these circumstances when they are exposed to higher level of claims, such as that incurred in the last 12 months, it is inevitable that their capital position will suffer and put pressure on prices. In this regard, it should be noted that the new prudential regime for insurers in the EU, known as Solvency II, which will come into force from the start of 2013 will place a greater emphasis on the need to price risk appropriately than the existing regime, and will in turn require insurance companies to be more conscious of their pricing policy. This will benefit the consumer in many instances, however in circumstances where there has been a significant increase in claims, it is likely to result in higher premiums.

The Government is of course committed to ensuring that the insurance costs in Ireland are competitive and correspond to appropriate international benchmarks. In that context the Revised Programme for Government contains a commitment to review insurance costs. It is expected that this review will commence shortly.