Jack Chambers (Dublin West, Fianna Fail)
Link to this: Individually | In context

As Minister for Finance, I have policy responsibility for the development of the legal framework governing financial services regulation, including for the insurance sector. In terms of the challenges associated with obtaining flood cover, please be aware that the provision of such cover is a commercial matter for insurance companies, based on an actuarial assessment of the risks they are willing to accept. Government cannot interfere in the provision or pricing of insurance, or direct as to what cover is provided, as is reinforced by the EU framework for insurance (Solvency II Directive).

Current Government policy in relation to increasing flood insurance coverage is focused on the development of a sustainable, planned and risk-based approach to managing flooding problems. Accordingly, €1.3 billion has been committed to the delivery of flood relief schemes over the lifetime of the National Development Plan (NDP) to 2030. This will protect approximately 23,000 properties across various communities from river and coastal flood risk.

The Department of Finance, in its review of policy in relation to flood insurance previously examined the UK’s flood insurance scheme to underwrite flood risk, known as “Flood Re”. This focused on the applicability of the Flood Re initiative for flood cover in Ireland and concluded this approach could lead to an increase in the cost of insurance and a potential financial exposure to the State. Given that the Flood Re system depends on the UK private reinsurance market, there is currently no evidence that the Irish reinsurance market could sustain any form of a Flood Re model. Furthermore, the scale of the UK home insurance market means it is in a position to support the financial impact of Flood Re across policyholders.

Separately, it should also be noted that any State insurance scheme would be required to comply with the same prudential rules as private companies, as set out in the Solvency II Directive, which means that the cost would need to reflect the risk involved. Such an approach could decrease competition, with insurers potentially discontinuing certain other lines if there is a view the State will insure these risks. We need to guard against introducing idiosyncrasies into the Irish market which would work against attracting further competition / entrants into the Irish market.

The Central Bank of Ireland recently conducted analysis of the flood protection gap in Ireland and published its Flood Protection Gap Report 2024. Importantly, the report notes that there is no single solution to closing the flood protection gap and it notes that Ireland has “broadly managed flood risk to date”. It should be noted that according to EU level data, Ireland has an above average rate of flood cover relative to the EU.

However, it is acknowledged that some households are still experiencing difficulties, particularly in areas with demountable flood defences which require varying degrees of human intervention in their installation. Furthermore, as with other aspects of climate change, it is also acknowledged that it cannot be assumed that current approaches will remain viable.

In this context, any Irish solution needs to specifically address the nature of the Irish protection gap.

In order to improve flood coverage levels, particularly in areas with demountable defences, the Department of Finance will continue to (i) encourage further collaboration and information sharing between the relevant stakeholders (including through existing channels such as the Insurance Ireland/OPW MoU Working Group); and (ii) engage with all relevant State bodies to consider how risks relating to the flood insurance protection gap can be mitigated (including for example: through the mitigation and adaptation work carried out by the OPW; and as part of the planning and development process). Our approach will seek to ensure the market remains involved in the provision of cover and avoid any moral hazard where the Exchequer becomes responsible for flood insurance cover.

Recognising that the long-term risk of climate change on insurers and insurability, the Department of Finance continues to monitor international developments, engage with the Central Bank of Ireland, the insurance industry and actively participate in cross-departmental working groups on insurance. It is important to note in this regard that the European Commission, IMF, EIOPA and the OECD are separately examining climate risk impacts for insurance and the concept of insurance protection gaps, with recommendations for policymakers to emerge in time. It is important that developments here align with those across the EU so the Irish market is not ‘out of step’ with others. Finally, I and Minister of State Richmond, along with our officials, will continue to engage on all aspects of insurance reform, including flood cover issues. These matters remain a priority for this Government and efforts continue to be made to encourage a responsive approach from the insurance industry.