Download draft statement to the oireachtas joint committee

STATEMENT TO THE OIREACHTAS JOINT COMMITTEE
ON ENVIRONMENT CULTURE AND THE GAELTACHT
TUESDAY 19TH MARCH 2013
1
On behalf of the members of the Irish Insurance Federation I welcome the opportunity
to address the Joint Committee on the problem of flooding with particular reference to
household insurance availability in areas that have experienced extreme weather
events.
2
IIF is the representative body for insurance companies in Ireland. Collectively IIF
members write the vast majority of all life and non-life business in the State. In 2012,
domestic non-life gross written premium amounted to €2.4 billion.
3.
As the voice of insurance companies in Ireland, IIF’s key functions include:
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4.
representing its members’ interests to Government, state agencies, regulatory
bodies, public representatives, other national interest groups, the media and the
general public;
representing the position of members at a European level particularly via Insurance
Europe, the European association for national insurance company representative
bodies;
keeping members abreast of relevant policy and regulatory developments and
providing a forum for member debate on such issues;
providing information to Government, the wider policy-making community and the
public about insurance.
We have experienced 8 major floods in Ireland since 2000. The claims cost of these
events was as follows:
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



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June 2012 - €54m
October 2011 - €127m
November 2009 - €244m
August 2008 - €96m
October 2004 - €38m
November 2002 - €50m
February 2002 - €37m
November 2000 -€51m
The cumulative cost of these 8 flood events was €697m. At the time the November
2009 floods represented the single largest insured loss every in terms of overall cost at
€244m. However the new record did not last long as it was closely followed by the
December 2009/January 2010 freeze which cost €297m. A further freeze in December
2010 cost €224m. This provides a further insight into the cost of severe weather
events.
5.
The 4 most serious floods have been in the last 4 years and the claims cost of these
events was as follows:
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June 2012 – Cork - €54m
October 2011 – Dublin - €127m
November 2099 – Cork and Shannon - €244
August 2008 – Nationwide - €96m
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The June 2012 floods in Cork break down as follows:
*
Class
Cost
No.
Average Cost
Household
€15m
627
€24k
Commercial Property
€38m
487
€78k
The October 2011 floods in Dublin break down as follows:
Class
Cost
No.
Average Cost
Household
€58m
3532
€16k
Commercial Property
€59m
1251
€47k
The November 2009 floods in Cork and the mid-west break down as follows:
Class
Cost
No.
Average Cost
Household
€76m
4629
€16k
Commercial Property
€160m
1541
€104k
The worst hit areas for household claims in the November 2009 floods were as follows:
Class
Cost
No.
Average Cost
Cork
Galway
Clare
Dublin
€21m
€16m
€9m
€5m
1164
471
368
815
€18k
€34k
€24k
€6k
The worst hit areas for commercial property claims in the November 2009 floods were
as follows:
Class
Cost
No.
Average Cost
Cork
Roscommon
Galway
Clare
€119m
€8m
€8m
€7m
649
64
166
88
€183k
€125k
€48k
€80k
11.
The response of insurers after all these flood events was to provide 24 hour helplines,
alternative accommodation and emergency funds where necessary. It was then
necessary to dry, clean, repair and restore properties, which can take some months
due to the time it takes properties to dry out.
*
Note: All figures in the tables are ex motor insurance.
12.
IIF’s role in the area of flooding is to collect statistical information, provide advice and
comment to the media, Government, politicians and the public and to liaise with the
OPW.
13.
The problems we see in the area of flooding are climate change, a legacy of poor
planning decisions, under-investment in flood defences, under-resourcing, a lengthy
planning process even for small flood defence projects and the fact that too many
agencies are involved in flood risk management.
14.
Whatever side one is on in the climate change debate there is no disputing the fact
that in the last decade insurers are seeing more frequent and costing weather-related
losses, not just in Ireland but globally. To have the largest weather-related losses in
such close succession has put significant pressure on the property insurance market.
However insurers have repeatedly displayed their resilience and protected people
against financial loss.
15.
Unfortunately a legacy of the building boom was that many houses have been built on
floodplains due to bad planning decisions. This reinforces the importance of taking
flood risk into account when zoning and planning.
16.
The Government capital budget for flood risk management averaged €37m per annum
between 2005 and 2011. Capital spend on flood risk management averaged €27m per
annum over the same period. To put this in context the total claims cost of the last 4
major floods was €520m.
17.
Flood insurance is widely available in Ireland and we estimate a very high penetration
rate of approximately 98%. It is a standard peril in household insurance policies. All
policyholders pay a contribution – low risk areas subsidise high risk areas. The
household insurance market is very competitive – there are 12 insurers with offices in
Ireland with others without an Irish office also offering insurance under EU Single
Market rules.
18.
When assessing risk insurers analyse the claims history of the property and any flood
prevention measures implemented by the OPW or local authority. Some people pay a
higher premium or have a higher flood excess because the flood risk is higher.
Exclusion of cover is a last resort. Insurance offers protection against a risk but not a
certainty. It is not tenable to ask policyholders in general to absorb the cost of
inevitable losses.
19.
Insurers spread their risk around the world through the mechanism of reinsurance. It is
therefore vital that insurers act prudently on flooding risks to ensure that affordable
reinsurance cover is maintained.
20.
IIF’s goals are to:
 as far as possible preserve the widespread availability and affordability of
insurance;
 partner with Government and OPW in particular to achieve this.
21.
The elements necessary for the sustainable provision of insurance are:
 flood mapping and accurate data to facilitate risk assessment;
 high penetration levels to prevent adverse selection;
 continued availability of reinsurance;
 investment by Government in structural and non-structural measures;
 deficiencies in the Planning Guidelines need to be addressed.
22.
Insurers need:
 maps in GIS format showing likely flood extents and benefit area maps showing
the likely extent of protection offered by remedial works;
 the status of remedial works (priority, progress etc.);
 design standards to which flood defences are constructed (the minimum standard
is a return period of 1:100 years).
23.
The IIF and the Office of Public Works have a common interest in ensuring that
information on completed flood defences is provided to insurers. Following our
previous discussions with the Joint Committee the IIF invited the OPW to join a
Working Group to accelerate the provision of flood defence information to insurers.
The Working Group commenced its work in January 2013 and meets monthly. The
objective of the working group is for IIF and the OPW to work together on the provision
of OPW information on completed flood defences in line with IIF’s requirements so that
household insurers can take this information into account when assessing risk in
respect of private dwellings.
24.
The scope of the work of the group is to:
 establish the areas for which flood defence information will be provided;
 establish the format in which the information will be supplied;
 agree a delivery date for sets of completed flood defences;
 agree how frequently the information will be updated.
25.
IIF believe that the 2009 Planning Guidelines are deficient and too complex. The future
availability and affordability of flood insurance were not considered. They are only
advisory and planning authorities are not obliged to follow them.
26.
In conclusion we would say that there needs to be a focus on impact mitigation. A flood
risk management plan is needed for all high risk areas. All flood sources should be
considered. Flood risk management plans need to be properly funded and resourced.
We should also stop creating new flood risks.
27.
Insurers are a major stakeholder. Insurers want to continue to offer affordable
insurance to as many people as possible. Minimising the financial impact of the cost of
floods is critical.
28.
We appreciate the engagement on the part of Minister Hayes and the OPW in the
above work. I would be happy to elaborate on any aspect of this presentation on
which members have questions.
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