Insurers may be forced to cover damages caused in areas with flood defences

Insurers could be forced to cover properties in flood-risk areas where defences have been put in place, under new legislation.

That is one of the options open to the Government and may be considered if the insurance industry refuses to alter its policies on covering flood-risk areas.

Taoiseach Enda Kenny and ministers met insurance industry chiefs in Dublin yesterday in what was described as a “frank” exchange of views.

The core issue was why companies are refusing to insure businesses and homes in flood-prone areas, despite robust defences having been put in place and having worked in recent weeks.

Ministers pointed out that tens of millions of euro were spent on defences in the Cork towns of Fermoy and Mallow, as well as Clonmel, Tipperary, and other towns, and that it had worked.

Industry chiefs, who were shown letters of refusals to property owners, have agreed to come back on Friday of next week after reviewing policies covering properties and how flood defences are working in uninsurable areas.

Companies represented at the meeting included Aviva, Alliance, FBD, AIG, and RSA.

Tánaiste Joan Burton pointed out that, while there was a precedent of relocating homeowners, as happened in 2009, many people did not want to leave their properties.

Agriculture Minister Simon Coveney said he was concerned that companies are not giving sufficient cover where removable defences are in place, despite these schemes being recognised by the EU.

Minister Coveney said: “I’m hopeful, following the meeting, that we can get some level of improved response to towns, given the defences evident over the last few weeks. It’s a decision for them [the industry], but if they refuse to recognise the investment made, the Government needs to look at what can be done to change that approach.”

Agriculture Minister Simon Coveney
Agriculture Minister Simon Coveney

Insurance Ireland chief executive Kevin Thompson said the industry would supply details next week around its level of coverage, as well as a review of areas with removable defences.

He said 86% cover was in place in areas with fixed defences, but this fell to 67% where there are removable defences.

“It’s the deployment around them, because they require manual intervention. Obviously, where you have manual intervention, you have a higher degree of that defence failing, which brings extra risk to our members,” said Mr Thompson.

It is understood the Government have a number of options if companies refuse to alter their policies, including a levy on policies to help fund flood defences and compensation, but this would likely trigger higher premiums for consumers, say Government sources.

Fresh legislation compelling companies to provide cover could also be on the cards, but this would likely lead to a type of risk equalisation, where all insured properties would end up funding cover for those in flood-risk areas. A last resort would be for the state to subsidise the cost for companies to insure properties. None of these options are definite, said sources.

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