Our citizens need insurance to protect them against floods
THE Government has announced a €5m emergency fund for small businesses owners who have had to deal with the devastation caused over the weekend by Storm Desmond, together with a newly proposed flood warning system at a cost of €2.5m. Such measures are, of course, necessities and will provide some relief to those who have been unable to acquire insurance cover and have experienced severe property damage across the country. However, these measures are yet again reactionary in nature and present only limited solutions to a continual and escalating climatechange problem. Worryingly, they still fail to address the primary issue – the difficulty of obtaining insurance cover against future flooding for both businesses and homeowners.
‘Six One News’ reported live from Bandon in County Cork on Monday evening to show the full extent of the recent flooding in the town. The residents were in shock and understandably reeling from the weekend’s storm. Many were disillusioned as they simply did not expect that such an event would revisit their town so soon again, following similar scenes in 2009.
The RTÉ news reporter finished his piece by saying that Bandon residents were sceptical of Government emergency measures following Storm Desmond due to their past experiences. He noted that many of the locals felt such packages were “overly complex, too difficult to access and slow to deliver”.
The people of Bandon have a right to be cynical, because the town is still awaiting the remedial works to take place following the 2009 floods. The €10m pledged by the Government at the time has yet to be spent, held up due to a lengthy legal challenge to the tendering process.
As alluded to above, the primary concern for those living in such high-risk flood areas is the inability to obtain insurance following an initial claim for flood damage.
This lack of insurance cover is both financially and psychologically debilitating for those residing in flood-prone locations. It has the effect of leaving these individuals reliant on emergency funding schemes and remaining that way into the future, unless a new insurance regime is adopted and embraced.
One only has to look to our nearest neighbour experiencing similar increases in flooding to see the progress the UK Government has achieved through its collaborative discussion with the insurance industry. Both have attempted to deal with this real issue head on and have created the new insurance model ‘Flood Re’, which comes into effect next year.
This collaboration between the Government and the insurance industry has created a subsidised scheme which will enable those in high-risk flood areas to obtain affordable insurance cover to protect their property against flood damage, even after previous claims.
The ‘Flood Re’ scheme will be a not-for-profit flood reinsurance fund, owned and managed by the insurance industry. Reinsurance is a way for insurers themselves to insure against large-scale losses.
‘Flood Re’ is essentially a fund to provide affordable flood cover to high-risk properties and will be funded by a levy on each annual household insurance premium, estimated at present to be around £10.50. In order to ensure affordability, the insurance premiums for properties in the flood areas will be capped by the UK Government in accordance with Council Tax bands.
Could ‘Flood Re’ be introduced into Ireland? This very query was raised as a parliamentary question to the Finance Minister, Michael Noonan, in June of this year. His reply indicated that such a proactive scheme was not on the horizon any time soon.
In his reply, he stated: “The UK Flood-Re scheme is only due to go live in April 2016 and so it would be premature to carry out a review of its impact at this stage.” He then outlined the Government’s current dual-action approach.
The first aspect centres on prioritising funding for remedial works in areas most in need and where appropriate insurance cannot be accessed. The second element involves improving communications with the insurance industry, with the aim that increased flood-defence remedial works and information will ‘facilitate’ future insurance cover.
Mr Noonan also warned that because of our smaller population in comparison to the UK, Ireland would have a smaller pool of participants and this may lead to significant increases in premiums to fund this type of scheme.
Such insurance hikes are a possibility, but no real certainty on costings can be provided unless such collaborative discussion takes place in the first instance, with the objective of achieving sustainable insurance alternatives for floodrisk zones. The Climate Change Conference in Paris last month again highlighted the stark reality that such extreme weather events will continue to increase in severity and scale into the future.
Therefore, the current Irish approach, as outlined above, fails to provide any sense of certainty and appears to be still at the behest of the insurance industry’s discretion in determining cover or not. The time has come for a more detailed examination of current measures and for serious discussions to take place between the Government and the industry.
The UK’s ‘Flood Re’ model may not be suitable for the Irish market, either in part or full, but it represents a participatory attempt to address a serious problem and, by its very existence, provides a greater sense of hope and security to UK citizens – a peace of mind that should be afforded to our own Irish citizens, who will undoubtedly endure future floods and pay the costly price of insurance exemption.