Insurance sector rules out blanket flood cover

The insurance sector has said it is impossible to provide blanket national flood insurance but stressed fixed defence schemes will greatly enhance the likelihood of property owners securing cover.

Outlining its position following recent talks with the Government regarding property owners who remain unable to get insurance policies, the industry said Ireland has a relatively high level of cover but that crucial obstacles remain.

On the central issue of demountable defences – those which require a degree of manual intervention to work as opposed to fixed systems that work automatically – it said cover would remain a problem.

“Should a failure occur [in demountable systems] and flooding result as a consequence, the financial impact for insurers would most likely be very significant,” the statement from Insurance Ireland, the representative body, said.

“Because of this potential exposure and concerns about the effectiveness of demountable flood defences, insurers have a limited risk appetite for providing flood insurance in these areas.”

Defences

These concerns are clearly reflected in latest statistics: 89 per cent of policies in areas with fixed flood defences include flood cover compared to 78 per cent of policies in areas with demountable defences.

The figures relate to 16 flood defence schemes on which the Office of Public Works (OPW) has provided data. The figure on fixed defences represents an increase from 86 per cent last November, while demountable related polices have climbed from 67 per cent in the same timeframe.

“Taking all 16 flood defence schemes (fixed and demountable together) we found that 83 per cent of policies in the areas benefiting from flood defences include flood cover (5,749 of 6,914 policies). This is up from 67 per cent in November,” it said.

The insurance sector clearly favours fixed systems but even then total cover is unlikely in an industry underpinned by commercial interests.

“It is not possible to achieve a 100 per cent rate of flood insurance cover nationally for the reasons outlined,” the statement concluded.

While frustration remains in many parts of Ireland dogged by flooding and unable to secure insurance, the sector has said its rates of cover compare favourably to other countries.

Responses from insurers representing 94 per cent of the market found that flood cover is extended to 98 per cent of property insurance policies.

That compares, according to Insurance Ireland, with penetration rates of less than 50 per cent in numerous countries including Austria, the Czech Republic, Finland, Germany, Greece, Italy, Poland and Slovakia.

Essential

“Insurance Ireland has always insisted that the fixed defence approach is essential when building flood defences and our findings continue to show that flood coverage rates are at their highest where fixed defences are built.”

The problems with alternative demountable systems, it said, were manifold. They depend on early warning weather systems; they can fall foul of mechanical failure; manual operators can be absent when flooding occurs and the simple possibility of human error.

Insurance Ireland said it would engage with the Government to explore further options, citing in particular the possibility of a State-run compensation scheme for those unable to secure flood policies. It did not elaborate on its potential role in that regard, but such funds are operated in other in other countries in the event of flooding or natural disasters.

Insurance Ireland chief executive Kevin Thompson said last night many of the questions regarding policies were down to individual circumstances.