Written answers

Thursday, 10 November 2016

Department of Finance

Flood Risk Insurance Cover Provision

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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33. To ask the Minister for Finance the status of the flood insurance models considered by his Department; the preferred option; the timeframe for its implementation; and if he will make a statement on the matter. [33879/16]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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My Department has carried out a review of policy in relation to flooding insurance, which I approved and was submitted for inclusion in the wider report of the Interdepartmental Flood Policy Co-ordination Group chaired by Minister of State Canney. This wider report was agreed by Government and published on the Office of Public Works website this week.

In the review, my Department examined a number of other jurisdictions and concluded that policy surrounding the availability of flood insurance falls, broadly, into three categories:

(i) Insurance Pool with State Indemnification:Such an arrangement would be financed by an agreed percentage of premiums on all policyholders. This option would lead to additional levies being imposed on household insurance policies at a time of increasing insurance costs, and could potentially lead to a considerable financial exposure to the State in the form of a State backstop.

(ii) Compulsory flood insurance:The conclusion was that this model would have a  limited impact on the availability of flood insurance unless pricing could be controlled.  However, the State and the regulator are expressly prohibited in EU law (Solvency II) from any attempt to limit the industry in terms of pricing.  This option also carried the risk of some insurance undertakings leaving the Irish market.

(iii) Private Sector provision of flood insurance which is the current approach with targeted State compensation after flood events:The recommendation of this option is based on clear evidence that this strategy is working as demonstrated by an incremental increase in the provision of flood insurance in areas protected by flood defences.  When compared with the other two options, it remains the best approach in terms of its responsiveness and effectiveness.  My Department's report recommended that the current approach be enhanced by strengthening the arrangements for data sharing between OPW and Insurance Ireland, as well as obtaining additional levels of data on the availability of flood insurance through detailed surveys.  The strengthening of the interaction between Insurance Ireland and the OPW has already commenced as demonstrated by the commitment by Insurance Ireland in July 2016 to assess the risk from the use of demountable flood defences as well as an agreement to hold quarterly meetings.

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