Oireachtas Report On Flooding and The Property Insurance Industry

Tithe an Oireachtais
An Comhchoiste um Chomhshaol, Cultr agus Gaeltacht

Tuasascil n gCoiste maidir le Tuili
agus
rachas Maoine in ireann, 2015
Nollaig 2015
____________________________
Houses of the Oireachtas
Joint Committee on Environment, Culture and the Gaeltacht
Report of the Committee on Flooding
and
Property Insurance in Ireland, 2015
December 2015
1ECG019
Report of the Committee on Flooding and Property Insurance in Ireland 2015
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CONTENTS
Contents.....................................................................................................................................................................2
Ramhra (Preface) ................................................................................................................................................6
1. Executive Summary ..................................................................................................................................... 10
2. BACKGROUND TO THE POLICY ISSUES .............................................................................................. 18
2.1 Weather-related insurance risks the global context .................................................................... 19
2.2 Climate change in Ireland in the 21st century..................................................................................... 22
2.3 The Irish insurance market ........................................................................................................................ 23
2.4 Irish insurance in the European context .............................................................................................. 24
2.5 Issues identified by the Joint Committee.............................................................................................. 29
2.5.1 Cost of flooding .......................................................................................................................................... 29
2.5.2 Households excluded from flood cover ........................................................................................... 29
2.5.3 Problems with geocoding and zoning by insurance companies............................................ 30
2.5.4 The Insurance industry and remedial works undertaken by the State or policyholders
..................................................................................................................................................................................... 30
3. POSITION OF THE IRISH INSURANCE INDUSTRY .......................................................................... 32
3.1 Cost of flooding................................................................................................................................................ 32
3.2 Households excluded from flood cover................................................................................................. 35
3.3 Cost of insurance premiums ...................................................................................................................... 38
3.4 The insurance market .................................................................................................................................. 39
3.5 Profit margins of insurance companies ................................................................................................ 40
3.6 Insurance industrys view of flood risk management ..................................................................... 41
3.6.1 Public agencies engaged in flood risk management ................................................................... 42
3.6.2 Criticisms of State flood defence programme by Insurance Ireland ................................... 43
3.6.3 State under-investment in flood defences ...................................................................................... 44
3.6.4 Response by OPW on expenditure on Flood Relief works....................................................... 45
3.7 Length of design and planning process for projects ........................................................................ 46
3.8 Planning Guidelines on flood risk management 2009 .................................................................... 48
3.9 The Committees response to the insurance industrys position ............................................... 50
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3.10 Lack of communication between public agencies and the insurance industry ................. 52
3.11 Insurance industry measures to improve cover ............................................................................. 52
3.12 Insurance industry requirements for sustainable provision of insurance .......................... 53
3.13 Flood defences: call for the OPW and the property insurance industry to co-operate on
design and standards ........................................................................................................................................... 54
3.14 Founding of Insurance Ireland - OPW Working Group ................................................................ 56
3.15 Progress of the Insurance Ireland OPW Working Group......................................................... 58
3.16 Flood maps and CFRAMS (Catchment Flood Risk Assessment and Management) .......... 60
3.17 Flood warning systems ............................................................................................................................. 63
4. INSURANCE CLAIMANTS POSITION ................................................................................................... 64
4.1 The situation of property-owners excluded from flooding insurance ..................................... 64
4.2 Issues arising from geo-coding ................................................................................................................. 67
4.3. Competition in the insurance market ................................................................................................... 70
4.4 Insurance claimants problems in claiming ......................................................................................... 71
4.4.1 Retention of insurance payments ...................................................................................................... 71
4.4.2 Failure to advise claimants of right to their own representative ......................................... 73
4.4.3 Problems in comparing insurance quotes ...................................................................................... 74
4.5. Central Bank findings on household property claims resulting from water damage ....... 76
4.5.1 Response of Insurance Ireland to Central Banks findings ...................................................... 79
5. RURAL DWELLERS DIFFICULTIES WITH FLOODING AND INSURANCE ............................. 80
5.1 Farmers excluded from flood cover due to incidence of summer floods ................................ 80
5.2 Summer flooding in the Shannon catchment area ........................................................................... 81
5.2.1 Lake water levels ...................................................................................................................................... 81
5.2.2 Flood warnings .......................................................................................................................................... 85
5.2.3 Essential maintenance work on the Shannon ............................................................................... 86
5.3 OPW response to evidence given to the Committee on the river Shannon............................ 88
5.4. Shannon maintenance: silt and trees .................................................................................................... 89
5.4.1 OPW response on Shannon silt and trees ....................................................................................... 90
5.5 River Shannon: Solution proposed ......................................................................................................... 92
5.6 Provisions for farmers affected by disruptive weather events: case of Argentina ............. 93
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6. STATE AUTHORITIES ROLE IN FLOOD REMEDIATION .............................................................. 94

6.1 Local authority Flood Remediation works .......................................................................................... 94
6.2 Length of time taken to implement Flood Remediation works: local authorities ............... 95
6.2.1 Habitats Directive constraints ............................................................................................................. 96
6.2.2 Local authorities and CFRAM............................................................................................................... 96
6.2.3. River management and water level updates ................................................................................ 97
6.2.4. Public Procurement Process ............................................................................................................... 98
6.3 Role of the OPW (Office of Public Works) in Flood Remediation ............................................... 99
6.3.1 Role and responsibilities of the OPW in relation to flood risk management ................. 100
6.3.2 OPW expenditure on Flood Relief works ...................................................................................... 102
6.4 Whether OPW should have the final say over other agencies? ................................................. 103
7. EU COUNTRIES PRACTICES ON FLOOD RISK INSURANCE .................................................... 104
7.1 EU: different systems of insuring against flood risk ...................................................................... 104
7.2 UK: agreement between government and insurance industry ................................................. 105
7.3 Belgium: Caisse Nationale des Calamits / National Disaster Fund ...................................... 107
7.4 France: Caisse Centrale de Rassurance (CCR) / Central Reinsurance Fund ..................... 108
7.5 Ireland, Belgium, France, and the UK situation pre-2013 ........................................................... 109
7.6 Countries in which government plays a role in disaster insurance ........................................ 114
8. SOLUTIONS PROPOSED BY WITNESSES AND COMMITTEE MEMBERS ............................ 118
8.1 Co-operation between Insurance Ireland and the OPW in designing flood defences ..... 118
8.2 Greater State investment in flood defences ...................................................................................... 118
8.3 Prohibition of building on flood risk areas ........................................................................................ 119
8.4 Better warning of imminent flooding .................................................................................................. 119
8.5 Legislated protocol obliging insurers to give cover ....................................................................... 120
8.6 Flood Disaster Fund / Levy ...................................................................................................................... 121
8.6.1 Trust Fund / Levy for the benefit of uninsurable households (NTMA) ........................... 122
8.6.2 Solidarity Levy Scheme ........................................................................................................................ 125
8.6.3 Opposition to a levy ............................................................................................................................... 127
8.7 River Shannon: proposed Strategy to Reduce Summer Flooding ............................................ 128
8.8 Other measure proposed .......................................................................................................................... 128
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9. Postscript: Recent Developments....................................................................................................... 130

9.1 Memorandum of Understanding between Insurance Ireland and the OPW ....................... 130
9.1.1 What information has the OPW provided to Insurance Ireland to date? ........................ 131
9.2 Joint Insurance Ireland / OPW Flood working group ................................................................... 133
9.3 Nationwide Flood Warning System ...................................................................................................... 133
9.4 Flood Mapping / Risk Assessment ........................................................................................................ 134
9.5 UK Flood Reinsurance scheme ............................................................................................................... 135
10.
Committees Recommendations ................................................................................................. 136
11.
Appendix 1 - Glossary ..................................................................................................................... 142
12.
Appendix 2 Official Report, Video Recordings, Witnesses ........................................... 146
13.
Appendix 3 Orders of Reference of the Committee ......................................................... 148
14.
Appendix 3 Members of the Joint Committee .................................................................... 154
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RAMHRA (PREFACE)
T scrob agus doineann thar men ar fad
In recent years, Ireland has witnessed a
ag
blianta
number of extreme weather events, and
deireanacha agus t codanna den tr go
flooding has become a recurring problem in
hirithe bhfgil faoi uisce ars agus ars
certain parts of the country in particular. It
eile d dheasca sin. Fadfaidh gur ag ir
is
orthu a bheidh na deacrachta sin sna
intensify in the coming decades as increased
deicheanna
precipitation is forecast for Ireland as a
teacht
amach
ar
irinn
de
ar
bhlianta
na
at
mar go bhfuiltear ag
romhainn
tuar go
possible
that
these
problems
may
possible result of climate change.
madidh ar an mbisteach a thitfidh in

irinn, agus creidtear go mbfhidir gurb
an t-athr ar an aerid is cis leis sin.
Cuireadh
fianaise
Chomhchoiste
agus
um
Gaeltacht
faoi
bhrid
Chomhshaol,
go
bhfuil
na
an
Cultr
mlte
The
Joint
Committee
on
Environment,
Culture and the Gaeltacht heard evidence

that
thousands
of
previously
flooded
gabhltas a fgadh faoi uisce roimhe seo
properties are now excluded from insurance
dolmhaithe anois chumhdach rachais.
cover. This gives rise to financial problems
ironn deacrachta airgid as an mid sin
as businesses and the housing market are
mar go luonn s ar ghntha agus ar an
affected. Furthermore, the Committee heard
margadh
tithochta.
cuireadh
in
il
Ina
don
cheann
sin,
that even properties that have not been
Choiste
gur
flooded have been excluded or had their
dolmhaodh gabhltais nr bdh fin n
premiums increased.
go bhfuil madaithe ar a bprimheanna.

T an Comhchoiste ag iarraidh go mbeadh
The Joint Committee is concerned that
cumhdach rachais ar fil go forleathan fs
insurance
agus acmhainn ag inir maoine in irinn
widely available and affordable to property
air. Dist s le fianaise ionadaithe an
owners in Ireland. It heard evidence from
tionscail rachais, ilitheoir ar rachas
representatives of the insurance industry,
cover
should
continue
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to
be
agus chomhlachta Stit a bhonn ag
insurance
gabhil doibreacha leaschin tuilte. Ina
engaged in flood remediation works. It also
theannta sin, dist s le roinnt de phobal
heard from some rural dwellers who have
na tuaithe a luonn deacrachta ar leith
experienced a particular set of problems in
orthu mar gheall ar thuilte.
relation to flooding.
Ar scr na bplit a rinne s ar an bhar, t
On foot of its deliberations, the Committee
roinnt molta leagtha amach ag an gCoiste
has set out a number of recommendations
a chabhridh, dar leo, leis na deacrachta
which it believes can contribute to resolving
sin a riteach agus a chinnteoidh go
these
mbeadh teacht ag gntha agus inir
businesses
and
maoine
access
affordable
ar
chumhdach
rachais
tuilte
claimants
difficulties
to
and
and
property
State
bodies
ensuring
that
owners
have
flooding
insurance
inacmhainne.
coverage.
Ba mhaith liom buochas a ghabhil le
I would like to thank all the individuals and
gach
organisations
duine
agus
gach
eagraocht
who
contributed
to
our
chabhraigh linn agus sinn ag breithni an
consideration of this subject and without
bhair
whose input it would not have been possible
chomh
seo.
fhadfaimis
cuimsitheach
tuarascil
agus
chomh
to
produce
such
comprehensive
and
hifeachtach canna a dhanamh murach
effective report. I would like to thank the
iad. Ba mhaith liom buochas a ghabhil
various stakeholders for their participation,
leis na pirtithe leasmhara go lir as pirt
cooperation and suggestions, many of which
a ghlacadh, as obair i gcomhar linn agus
the Committee has included in this report.
as na molta a thug siad, a bhfuil cuid

mhaith
acu
irithe
ag
an
gCoiste
sa
tuarascil seo.
Ba mhaith liom buochas a ghabhil le
comhalta an Choiste as an obair a rinne
Committee for their work in preparing this
siad chun an tuarascil a ullmh agus le
report and the staff of the Committee
foireann
agus
Secretariat and the Oireachtas Library and
Seirbhs Leabharlainne agus Taighde an
Research Service for their advice to the
Oireachtais as an gcomhairle agus as an
Committee and their assistance in compiling
gcnamh a thug siad don Choiste le linn an
the draft report.
Rnaocht
na
gCoist
wish
to
thank
the
members
of
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the
dracht-tuarascil a chur le chile.
Mar
fhocal
scoir,
iarraim
ar
an
Aire
To conclude, I call on the Minister for the
Comhshaoil, Pobail agus Rialtais itiil, an
Environment,
tUas. Alain Ceallaigh T.D., ar an Aire
Government,
Airgeadais, an tUas. Michel Nuanin
Minister for Finance Mr Michael Noonan T.D.,
T.D., ar an Aire Stit ar a bhfuil freagracht
the
speisialta maidir le hOifig na nOibreacha
responsibility for the Office of Public Works
Poibl, an tUas. Somn hEarcha T.D., ar
Mr. Simon Harris T.D., the Central Bank of
Bhanc Ceannais na hireann agus ar

phirtithe
leasmhara
eile
staidar
dhanamh ar an tuarascil seo agus go

hirithe ar na molta a rinne an Coiste. Tim
fin agus an Coiste ag sil le dul i mbun
plit le gach pirt ar an bhar seo sa
Minister
Community
Mr.
of
Alan
and
Kelly
State
Local
T.D.,
with
the
special
Ireland, and other interested parties to

study this report and in particular the
recommendations that the Committee has
put forward. I and the Committee look
forward to engaging with all parties on this
subject in the near future.
gharthodhcha.
__________________
Michael McCarthy TD
Cathaoirleach
14/12/2015
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1. EXECUTIVE SUMMARY
The Joint Committee on Environment, Culture and the Gaeltacht heard evidence that
thousands of previously flooded properties are now excluded from insurance cover. This
gives rise to financial problems as businesses and the housing market are affected.
Furthermore, the Committee heard that even properties that have not been flooded have
been excluded or had their premiums increased. It is possible that these problems may
intensify in the coming decades as increased precipitation is forecast for Ireland as a
result of climate change.1
The Joint Committee is concerned that insurance cover should continue to be widely
available and affordable to property owners in Ireland. It heard evidence from
representatives of the insurance industry, insurance claimants and State bodies engaged
in Flood Remediation works. It also heard from some rural dwellers who have
experienced a particular set of problems in relation to flooding.
Ireland has a model of property insurance in which flood cover is bundled with all other
risks. This model results in a high availability (penetration rate) of flood cover and has
been described by the European Commission as the most appropriate model. This model
is also used in the United Kingdom, France and Belgium. Insurance Ireland2 witnesses
explained to the Joint Committee that insurance offers protection against a risk but not
against a certainty. Insurance cannot cover policyholders against an inevitable event as
the cost of premia would greatly increase for all policy holders. Insurance Ireland stated
that high penetration levels of flood cover are necessary to ensure the continuance of
the current model whereby low-risk areas subsidise higher-risk areas. The continued
availability of flood reinsurance is vital as it allows insurers to provide cover for
catastrophic risks by spreading costs over time.
See, for example, Adaptation to Climate Change: Issues for Business (August 2010, p.7) published by Forfs, available
online at:
http://skillsstrategy.ie/media/Adaptation%20to%20Climate%20Change%20Summary%20Report%20ONLINE%20
FINAL.pdf
2 Since the Committee commenced it deliberations, the Irish Insurance Federation has been renamed Insurance
Ireland. For the purposes of simplicity and clarity, the new title shall be used throughout the report.
1
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The roles of the insurance industry and State authorities are complementary in that the
State, through its lead agency, the Office of Public Works (OPW), manages flood risk,
constructs structural defences where necessary and, through local authorities, carries
out non-structural measures such as clearing watercourses and drains. These measures
enable the insurance industry to provide cover against the risk of flooding.
Insurance Ireland submitted that more Government investment in structural defences is
needed to preserve flood insurance in high-risk areas, and that current levels of
implementation of flood defences need to improve.
According to Insurance Ireland,
deficiencies in the current Planning and Flood Risk Management Guidelines (November
2009)3 should be addressed. In this regard, it called for a prohibition of building on flood
plains. Other elements identified by Insurance Ireland as necessary for the sustainable
provision of insurance are availability of flood mapping and accurate data to facilitate
risk assessment; high insurance penetration levels to prevent adverse selection, and
continued availability of re-insurance.
The OPW responded by outlining the considerable investment that the State has made in
the construction of flood defences. The OPW estimates that over 5,000 properties have
benefited from this investment, with the estimated benefit in terms of damage and loss
avoided amounting to almost 900 million. Their witness said that the insurance industry
has also benefited from this investment as its large claims payment costs for flooding,
which amounted to almost 700 million since 2000, would have been much higher but
for the remedial and defence works undertaken by the OPW. Also, funding of 21.6
million has been provided since 2009 in respect of 400 projects in the minor and coastal
protection scheme. The OPW estimates that more than 2,400 properties (in addition to
the ones mentioned above) have varying levels of protection as a result of this
expenditure.
The OPW witness stated that the current Catchment Flood Risk Assessment and
Management (CFRAM) programme to identify, assess and map flood risk nationally will,
once it is completed and implemented, enable the insurance industry to take decisions
based on the fullest assessment of that risk.
Available online at:

http://www.opw.ie/media/Planning%20System%20and%20Flood%20Risk%20Management%20Guidelines.pdf.
3
11 | P a g e
Kildare County Council witnesses outlined the local authorities complementary role in
flood risk management and concurred that CFRAM will make a major contribution to their
operations.
Insurance Ireland has supplied information to the OPW to ascertain whether the OPW
can match its priority areas with locations where insurers have made significant pay outs
on claims. The idea is that if effective measures are taken, which will include insurance
industry participation in design and an agreed standard of the built defences, there will
be greater availability of cover in areas that previously posed a problem. The claims cost
associated with flooding, subject to frequency and climate change issues, should
decrease and therefore the insurance cost should decrease.
The Committee heard from organisations representing those who have been excluded
from flood cover, or are at risk of being excluded, with the result that it is not possible to
get mortgages on their homes and the value of their homes plummets. Among the
issues raised by these stakeholders was the problem of householders located in geocoded areas who had been refused cover or had their premiums increased even though
their property had not been flooded. Since the Committee was informed by insurance
industry witnesses that geo-coding pinpoints a property, it is at a loss to understand the
reason for the problem. This issue requires a systematic investigation by the Central
Bank of Ireland to determine its extent and advise on the appropriate measures.
The Committees key concern was to discover how policyholders located in a geo-coded
area that identifies their properties as liable to repeat flooding can exit from this
category and have their flood cover restored or their premiums reduced. The insurance
industry witnesses explained that a letter from a local authority engineer certifying the
standard of flood defences would not suffice; insurance underwriters needed in-depth
technical data and participation in design, as described above.
Committee members were also informed of insurance company practices which some
witnesses claimed placed obstacles in the way of claimants. These include retention,
failure to advise claimants of their right to their own representative and unsatisfactory
settlements. Retention is the term for the insurers practice of providing advance
payments relating to the costs of repair / reinstatement (which allows repairs to be
undertaken) and paying the balance on receiving of a final invoice from the claimant.
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Subsequent to the Committee hearings, the Central Bank of Ireland conducted an

inspection into a small sample of actual insurance claims and found that such problems
were experienced by a number of claimants.
The Committee also heard from rural dwellers who are excluded from insurance cover
because of increased summer flooding of the River Shannon, and who do not see the
restoration of insurance as a realistic prospect. According to the Irish Farmers
Association (IFA) witness, the core issue is not insurance, but the failure of the State to
put in place an effective river maintenance programme, to remove the impediments in
the Shannon and to return to the pre-1970s lake water levels. They urge the reduction
of the water levels to the lowest level consistent with navigation purposes so that the
river is able to take additional water at critical times, an effective flood warning system
and essential maintenance work to be carried out on the Shannon including removal of
silt and trees.
The OPW responded to their points by affirming that a body of European and national
legislation governs what can and cannot be done on environmental grounds. The
authorities are obliged to enforce the EU Habitats legislation. Issues around the
environmental impact of removing the silt, such as the disturbance of various plants,
flora and fauna, are regulated under the Habitats Directive and its ensuing legislation.
Pending the outputs from CFRAM, when the OPW will have a proper model of the river
and a proper understanding of the water levels and how the water levels in the lake and
the callows are interconnected, the OPW will not be in a position to make decisions on
works in the Shannon catchment area.
An issue that came to light during the hearings was the wish of the insurance industry
for more information exchange and co-operation between the industry and the State
authorities on flood mapping and on the design of Flood Remediation works. On the
initiative of the Joint Committee, a Working Group was established with the objective of:
matching the insurance industrys priority areas with State planning for Flood
Remediation works; and
informing the industry of the technical standards of the State works so that
insurance underwriters can take this into account in assessing risks.
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Thus far, it would appear this work is producing very positive benefits, and in March
2014, a Memorandum of Understanding was signed between Insurance Ireland and the
OPW on the sharing of information regarding completed flood defence works. The
anticipated outcome of this arrangement is that the insurance industry will have greater
understanding of the extent of the protection provided by completed OPW flood defence
works and will reflect this in assessing the provision of flood insurance to householders in
areas where works have been completed.
The Committees ambition is that this may lead to the inclusion of properties that were
previously excluded from insurance and to the reduction of premiums to more affordable
levels. However, if this ambition is not realised, other solutions may need to be
considered, including a partnership between the insurance industry and government. In
this regard, the Committee heard several proposals from witnesses and from the
Committees own members (see section 8).
Ireland has an insurance model described as the most appropriate in an EU report. 4
Several countries with insurance models similar to that in Ireland have experienced
problems faced here and have implemented partnerships between the insurance industry
and government. The schemes implemented in the United Kingdom, Belgium and France
are described in this paper (see section 7).
In 2008, a Statement of Principles agreement was established between the UK
government and the Association of British Insurers (ABI). This agreement aimed to keep
insurance costs down for those households in flood risk areas. The ABI agreed to offer
such households affordable home insurance in return for government development of
new flood defences and reinforcement of existing ones. In July 2013, a new scheme was
introduced to cover losses of UK householders who can no longer afford insurance cover.
Under the new arrangements, a new nonprofit making insurance fund, known as Flood
Re, will be established to provide insurance cover to 500,000 households in the worst
affected parts of the UK. Under Flood Re, every household in the country will pay a small
Natural Catastrophes: Risk relevance and Insurance Coverage in the EU, European
Commission, Joint Research Centre Scientific Support to Financial Analysis Unit Institute
for the Protection and Security of the Citizens, September 2012.
Accessed at: http://ec.europa.eu/internal_market/insurance/docs/naturalcatastrophes/jrc_report_on_nat_cat_en.pdf
14 | P a g e
levy (of 10.50) on their insurance premium to fund a pooled subsidy for those most at
risk of flooding, to ensure they can still obtain affordable home insurance.
Belgium has a Caisse Nationale des Calamits (National Disaster Fund) from which
claimants can get repairs after disasters such as natural disasters (floods, earthquakes,
discharge or overflow of public sewers, landslides and subsidence of soil). However, the
National Disaster Fund intervenes in very limited circumstances.
France has its Caisse Centrale de Rassurance (Central Reinsurance Fund), which is a
reinsurance company entirely owned by the French Republic. It is responsible for
designing, implementing and managing instruments to meet the coverage of exceptional
risks in the service of its customers and the public interest. These include reinsurance of
risks of natural disasters.
Solutions proposed by witnesses or Committee members
Co-operation between Insurance Ireland and the OPW in designing flood

defences;
Greater investment by State authorities in flood defences;
Prohibition of building on flood risk areas;
Better flood warning;
Legislated protocol obliging insurers to give cover;
Flood Disaster Fund / Levy;
Trust Fund / Levy for the benefit of uninsurable households;
Solidarity Levy Scheme;
River Shannon - Solutions proposed:

o
The introduction of a system of allowing river water to move on when

heavy rainfall is forecast and occurs;
That essential maintenance work to be carried out on the River Shannon.
15 | P a g e
Other Measure proposed

The Joint Committee advocates that the Central Bank of Ireland conduct an inspection
into a significant sample of properties which have no history of flooding yet have been
refused cover or had their premiums increased. This inspection should lead to a
determination of the appropriate measures to be taken in these instances.
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2. BACKGROUND TO THE POLICY ISSUES

Insurance against flooding is important to protect households from the impacts of heavy
rainfall. Flooding involves very significant financial costs and often entails having to live
elsewhere for months while properties are dried out and refurbished. For those without
or those denied insurance, flooding can result in severe financial hardship.
In Ireland, insurance cover for flooding is included as a standard part of buildings and
contents policies, which helps people to manage the potential financial consequences of
their home being flooded. Mortgage lenders in Ireland generally require mortgage
holders to purchase buildings insurance. Flood insurance has been universally available
in Ireland up to recently as it has been a standard element of household insurance.
However, policy-holders in certain areas of high flood risk have in recent years found
themselves excluded from obtaining flood insurance cover or have had to pay
substantially higher premiums.
The Joint Committee expressed concerned during its hearings into these matters that
property insurance should continue to be widely available and affordable in areas of flood
risk in Ireland. The question of who will bear the costs of future flood-related damage,
i.e. insurers, governments or individual policyholders, has come into focus in several
countries in recent years.
The insurance market is changing in a number of ways including as a result of more
sophisticated flood risk models becoming available. Households in flood risk areas are
more likely than in the past to be charged a premium that reflects their risk of making a
claim. In the short term, many households in flood risk areas may, in future, struggle to
pay increased insurance premia. Householders could face further worry if they are
unable to meet the conditions of their mortgage or find it difficult to sell their home
because of insurance problems. This could potentially contribute to existing problems in
the housing market in some areas. If flooding were to take place, such households could
be left in financial hardship, placing additional pressure on community support services
and the State.
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In this context, the OECD has noted that:5

Any gaps in coverage, sustained excessive pricing disconnected from
underlying risks or loss experience or other similar problems in a country
where insurance markets and related data infrastructures are already well
developed may be indicative of a market failure that may be examined. For
instance, it is important to identify uninsured populations and sectors of the
economy that are financially vulnerable and assess the reasons why they
lack insurance. Measures may be taken to overcome these hurdles and
make risk transfer mechanisms available and affordable.
2.1 WEATHER-RELATED INSURANCE RISKS THE GLOBAL CONTEXT

It has been reported that weather-related catastrophes - which include flood, storm,
earthquake and drought - have been increasing across the globe. Climate change may
be just one of the factors in the associated insurance risks, according to a report in the
Financial Times:6
Certainly the number of global weather-related catastrophes varies
significantly from year to year. Even so, the latest disasters contribute to a
trend the insurance industry has observed for decades: the frequency of
events that require them to make pay outs is on the rise.
Data from reinsurance group Munich Re that compensate for year-to-year
fluctuations show a near nine-fold rise since 1980 in losses to the insurance
industry arising from weather-related catastrophes, after adjusting for
inflation. Global economic losses from weather-related events came to
about $150bn in 2012, according to Munich Re, of which $55bn were
insured losses. This raises the question of whether the trend can be
reversed - and if not, who should foot the bill.
OECD, Disaster Risk Management and Risk Financing, G20 / OECD Methodological Framework, 2012:
http://www.oecd.org/gov/risk/G20disasterriskmanagement.pdf (page 78)
6 Extreme weather is just one factor insurers need to consider, Financial Times, 29 September 2013.
5
19 | P a g e
Some leading insurance executives have warned that the rising costs
threaten the continued provision of important types of coverage at
affordable levels, particularly for flood-related damage in vulnerable
regions. In a report this year, the Geneva Association, trade body for the
global insurance industry, warned that a shift was taking place towards a
new normal for a number of insurance-relevant hazards.
However, the role of climate change in contributing to the rise in insurance
losses remains contentious.
Economic growth has played a much more important role, say several
scientists and insurance executives. Rising insurance losses driven by
development
are
not
necessarily
problematic
as
they
should
be
accompanied by a corresponding increase in premium income.

The main drivers of the [rising] losses are mainly increases in population
and in wealth
says Ernst Rauch, head of the corporate climate centre at the reinsurer
Munich Re...
The impact climate change might be having on insurance policy terms or
premium levels is even more debatable.
The insurance industry is awash with capital - not least as pension funds
increasingly invest in the sector through securities such as catastrophe
bonds. These competitive forces are keeping a lid on the premiums that
large sections of the industry can charge
This is not least because the terms of annual policies are renewed each
year, minimising the extent to which insurers need to incorporate any
projected impact of long-term climate change risks into annual policies.
Even so, insurers are concerned about a phenomenon that has
accompanied economic growth: increased building in risky locations, as
commercial
and
industrial
developments
take
place
on
low-cost
greenfield sites.
20 | P a g e
John Fitzpatrick, head of the Geneva Association
, has called on
governments to tighten building restrictions, as well as to invest more in

flood defences, to mitigate the fallout from extreme weather hazards
Yet Mr Muir-Wood, a leading author on reports by the Intergovernmental
Panel on Climate Change, says for now climate change is not driving
industry concerns about the provision of flood insurance. Instead, he says,
developments in catastrophe modelling technology are giving insurers more
detail about the risks presented by each household - prompting them to
want to price risks accordingly.
People have been used to the idea that insurance is a flat-rated
commodity like mortgage rates, or the price of petrol
he adds
But once you start getting in to the reality of risk, you see extremely
strong localised variations. That is a basic reality of flood risk that society
has to confront. Once you start modelling it at very high resolution, you
see how variable it is.
The Geneva Association: The leading international think tank of the insurance industry.
21 | P a g e
2.2 CLIMATE CHANGE IN IRELAND IN THE 21 ST CENTURY

On 25 September 2013, Met ireann published a report on the future climate of Ireland
entitled Irelands Climate: The Road Ahead.. 8 New global climate model simulations
carried out in Ireland provide an update on the expected changes in the earths climate
over the 21st century. Among its key results for the Irish climate were that winters are
expected to become wetter, with increases of up to 14% in precipitation under the high
emission scenarios by mid-century, and that summers will become drier (up to 20%
reduction in precipitation under the high emission scenarios). The frequency of heavy
precipitation events during winter shows notable increases of up to 20%. Changes in
precipitation are likely to have significant impacts on river catchment hydrology. The
models predict an overall increase (0 to 8%) in the energy content of the wind for the
future winter months and a decrease (4 to 14%) during the summer months. A small
decrease in mean wave heights is expected around Ireland by the end of the century,
while in winter and spring, storm wave heights are likely to increase.
These Met ireann models indicate that the degree of flooding experienced in Ireland
may, in future, worsen and that a greater level of investment in long-term flood
management
may
therefore
be
necessary.
Without
adequate
mitigation,
those
heightened risks may lead not only to more homes and businesses suffering flooding but
to insurance premiums increasing to the point of becoming unaffordable for many
citizens and small and medium enterprises (SMEs).
Accessed at: http://www.met.ie/publications/IrelandsWeather-13092013.pdf
22 | P a g e
2.3 THE IRISH INSURANCE MARKET

Representatives of Insurance Ireland appeared before the Joint Committee on 25
September 2012. They were Mr. Michael Kemp, chief executive, and Mr. Michael Horan,
non-life insurance manager.9
Mr.Kemp and Mr.Horan informed the Committee at the hearing that there are 12
insurers with offices in Ireland offering household insurance, and others without an Irish
office offering insurance under EU Single Market rules. They stated that there is no
shortage of suppliers, described the market as very competitive and claimed that
policyholders in low-risk areas already subsidise high-risk areas. In the absence of this
approach, they stated that flood insurance would become unaffordable in some parts of
the country where flood insurance is still available but where flood risk is judged by the
industry to be above average: 10
Insurance companies operate in a global market and spread their risks around
the world using numerous specialist reinsurance companies. It is vital that the
insurance industry acts with prudence on flooding risks to ensure that
affordable reinsurance11 cover is maintained.
As previously noted, flood cover is a standard part of household insurance. However,
according to evidence given to the Committee by Insurance Ireland, the penetration rate
in respect of flood cover is 98%. This implies that 2% are excluded from flood cover.
See Committee Debates,25 September 2012. Accessed at:

http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/committeetakes/ENJ20120925
00003?opendocument#F00300.
10 Ibid.
11 Reinsurance: Insurance protection bought by an insurer to limit its own exposure. The availability of reinsurance
protection allows an insurer to expand its own capacity to take on risk. Without a reinsurance facility, each insurer
would be able to accept less business.
9
23 | P a g e
2.4 IRISH INSURANCE IN THE EUROPEAN CONTEXT

The Committee Chairman, in his opening remarks at the first Committee hearing,
referred to a European report, Natural Catastrophes: Risk relevance and Insurance
Coverage in the EU, which in its examination of flood risks commented favourably on the
model used by the Irish insurance industry. This model is based on the concept of
bundling insurance for a broad range of risks together in one comprehensive risks
policy.
The European Commission report Natural Catastrophes: Risk relevance and Insurance
Coverage in the EU12 examined how flood risk among other weather events is handled in
insurance systems in the EU.
According to this report, the insurance situation in regard to flood damage varies widely
among Member States of the EU. The report states that in Ireland, the United Kingdom,
Belgium and France the Natural Catastrophe (NatCat) insurance market seems to have
developed efficiently, while other countries could face potential problems. Penetration
rates are not very high in most Member States for which information is available. The
only Member States where the rate of penetration is high are those where flood
insurance is bundled as part of a more comprehensive policy, as is the case in Ireland.
The way NatCat coverage is priced among EU Member States also varies widely. Some
Member States adopt a risk-based pricing mechanism, while others adopt flat-pricing.
The European Commission report comments that adoption of risk-based premiums does
not affect the financial efficiency of the insurer (which is regulated by solvency
requirements), but that it may reduce the moral hazard and that it might lead to a
better understanding of the development of risk. Ireland is one of six Member States
which have risk-based premiums for flood.
This report placed Ireland in Cluster 1 consisting of Belgium, Ireland, France, Sweden,
and the United Kingdom. In these countries the insurance market is reported as having
Natural Catastrophes: Risk relevance and Insurance Coverage in the EU.

European Commission, Joint Research Centre Scientific Support to Financial Analysis Unit
Institute for the Protection and Security of the Citizens, September 2012.
Accessed at: http://ec.europa.eu/internal_market/insurance/docs/naturalcatastrophes/jrc_report_on_nat_cat_en.pdf
12
24 | P a g e
developed efficiently, as total losses (both historical and simulated) are not very high,
while penetration rates are high. This could be mainly due to the fact in these countries
NatCat insurance is bundled as part of a more comprehensive policy (usually fire,
household and accidental damages insurance).
As a comparison, because the UK is in Cluster 1 with a similar insurance model to
Ireland, the corresponding table for the UK is presented. It will be seen that the UK
insurance industry has experienced more losses from flooding than Ireland. In the UK
the government and the insurance industry have recently reached agreement to
introduce a new scheme for households who are having difficulty gaining insurance
cover.
25 | P a g e
Figure 1 Map of EU Insurance Clusters

Note: Ireland is in Cluster 1 (green), described as having the most appropriate solution
Source: Natural Catastrophes: Risk relevance and Insurance Coverage in the EU.
European Commission, Joint Research Centre Scientific Support to Financial Analysis Unit
Institute for the Protection and Security of the Citizens, September 2012.
This report also compiled insurance losses from weather related events (see Table 1).
26 | P a g e
Table 1 Insurance losses from weather-related events in Ireland and the UK,
1990-2010
Source: Ibid (p.56).
27 | P a g e
Source: Ibid (p.77)
28 | P a g e
2.5 ISSUES IDENTIFIED BY THE JOINT COMMITTEE

The issues of concern to the Joint Committee were outlined thus by the Chairman.13
2.5.1 COST OF FLOODING

The Chairman observed that flooding is now a regular feature of weather conditions and
that it is costly to repair the resultant damage. Sizeable costs were incurred during the
several major floods experienced since 2000.
2.5.2 HOUSEHOLDS EXCLUDED FROM FLOOD COVER

The Committee Chairman noted that certain localities have suffered extensively from
flooding and many thousands of people now cannot insure their homes. The Chairman
expressed concern that the criteria now being used by insurance companies to assess
the risk of flooding may be contributing to the problem. The Committee were anxious to
ensure that if an area has flooded once that this would not result in it becoming one that
would be refused insurance by the industry on an ongoing basis.
Of concern also were properties in the neighbourhood which had never been flooded and
yet were refused cover or had their premiums increased.
The Chairman said that a situation cannot be allowed to develop in which large numbers
of households nationwide are deemed to be outside the protection of the normal
insurance schemes.
JCECG Debate,25 September 2012. Accessed at:

13
29 | P a g e
2.5.3 PROBLEMS WITH GEOCODING AND ZONING BY INSURANCE COMPANIES

This issue seemed to some insurance claimant stakeholders and to the Committee to
arise from the practice of regions being geocoded14 into zones by the insurance industry
in order to identify those at particular risk of flooding or other events. These zones could
include properties which had never been flooded and yet were subjected to increased
premiums.
The Committee were concerned that even where remediation works are carried out to
reduce the relevant risks. it seems difficult to have this zoning removed. The Chairman
said that parts of the country deemed flood risks 15 years ago have had major relief
works carried out to prevent further problems. However, they are still zoned as being a
flood risk.
2.5.4 THE INSURANCE INDUSTRY AND REMEDIAL WORKS UNDERTAKEN BY THE

STATE OR POLICYHOLDERS
The Committee was concerned that the insurance industry should take account of the
specific location of houses in the context of remedial flood defence works successfully
completed. The Committee hoped that it was not a matter of administrative convenience
for the industry to label an entire area as being prone to flooding, that is, without taking
cognisance of what remedial works had been completed. The Committee queried
whether insurance companies were assessing quotes individually, based on merit, or
otherwise.
In examining these issues, the Committee was aware of the issues arising from exclusion
from flooding insurance as raised by the OECD in a study of disaster risk management: 15
Government
thus
need
to
identify
those
populations
(e.g.,
poor
households) or sectors that are financially vulnerable and lack access to

financial tools and consider ways, through programs or arrangements to
Geocoding is the process of converting street addresses or other locations (postal codes, city & state, airport codes,
etc.) to latitude and longitude, which can be entered into a GPS device or geographical software. Source:
http://www.gpsvisualizer.com/geocoding.html.
15 OECD, Disaster Risk Management and Risk Financing, G20 / OECD Methodological Framework, 2012. Accessed at:
http://www.oecd.org/gov/risk/G20disasterriskmanagement.pdf (page 78)
14
30 | P a g e
ensure that basic compensation or post-disaster risk financing are made

available to reduce economic and social hardship, for instance through the
development of innovative financial tools or through the establishment of
government compensation programs or arrangements.
In the absence of such arrangements, the government may be called upon
to provide post-disaster financial assistance in an ad hoc manner, which
could potentially increase outlays.
If there are significant populations or sectors that are financially vulnerable
and, for whatever reason, uninsured, governments need to factor implicit
contingent liabilities into financial planning given expected post-disaster
funding pressures. A similar consideration applies to any explicit contingent
liabilities created by governmental involvement in an institutional scheme
for risk financing or risk transfer. Governments also need to consider that
they may be expected to handle any peak risks that lie beyond the financial
capacity of others, including the insurance sector, to absorb.
31 | P a g e
3. POSITION OF THE IRISH INSURANCE INDUSTRY

Mr. Michael Kemp, Chief Executive, and Mr. Michael Horan, non-life insurance manager
of Insurance Ireland appeared before the Committee on 25 September 2012 and gave
evidence on these matters.16
3.1 COST OF FLOODING

Insurance Ireland witnesses informed the Committee that the floods in June 2012 led to
1,260 claims costing 54 million. Of these, a total of 627 were household claims costing
15 million, 487 were commercial property claims costing 38 million and 146 were
motor claims costing 1 million.
They stated that there have been seven other significant flood events in Ireland since
2000; the cumulative cost of these eight flood events was 697 million (see table 2).
However, the November 2009 floods represented the single largest insured loss ever (at
that time) in terms of overall cost, at 244 million. The new record did not last long as it
was closely followed by the December 2009 - January 2010 freeze, which cost 297
million. A further freeze in December 2010 cost 224 million (see table 3).
JCECG Debate, 25 September 2013. Accessed at:

16
32 | P a g e
Table 2 Cost of Flood Events 2000-2012

Year
Event
Cost
June 2012
Flood
54m
October 2011
Flood
127m
November 2009
Flood
244m
August 2008
Flood
96m
October 2004
Flood
38m
November 2002
Flood
50m
February 2002
Flood
37m
November 2000
Flood
51m
TOTAL
Flood
697m
Source: Insurance Ireland
Table 3 Cost of Weather Events 2000-2012

Year
Event
Cost
June 2012
Flood
54m
October 2011
Flood
127m
December 2010
Freeze
224m
January 2010
Freeze
297m
November 2009
Flood
244m
January 2009
Storm
16m
January 2009
Freeze
40m
August 2008
Flood
96m
October 2004
Flood
38m
November 2002
Flood
50m
February 2002
Flood
37m
December 2001
Freeze
30m
November 2000
Flood
51m
TOTAL
Weather
1304m
Source: Insurance Ireland
33 | P a g e
Mr. Horan told the Committee that in the past decade insurers have seen more frequent
and more costly weather-related losses, not just in Ireland but globally. He indicated
that suffering the largest weather-related losses in such close succession has put
significant pressure on the property insurance market. However, he maintained that
insurers have displayed resilience and injected over 1.3 billion back into the economy
following these weather events, i.e. in pay outs following claims.
On 19 March 2013, Insurance Ireland witnesses again appeared before the Joint
Committee and gave a further breakdown of the costs above. They were Mr. Kevin
Thompson, chief executive officer, and Mr. Michael Horan, non-life insurance manager.
Mr. Thompson explained that the most serious floods have been during the previous four
years and that the resulting claims costs are as follows:
June 2012 - there was a cost of 54 million in the Cork region;
October 2011 - there was a total cost of 127 million in the Dublin region;
November 2009 - there was a cost of 244 million in the Cork and Shannon
regions; and
August 2008 - there was a cost of 96 million nationwide.
Insurance Ireland witnesses made known that the response of insurers after all these
flood events was to provide 24-hour helplines, alternative accommodation and
emergency funds where required. It was necessary to dry, clean, repair and restore
properties, a process which can take some months due to the time it takes properties to
dry out. However, at a later hearing Mr. Brendan Dempsey of Cork Society of St. Vincent
de Paul (SVP) claimed that flooding did not seem to him to be costing insurance
companies that much (for example, constituting less than 1% of one insurance
companys total annual payout).
34 | P a g e
3.2 HOUSEHOLDS EXCLUDED FROM FLOOD COVER

Insurance Ireland informed the Committee on 25 September 2012 that the insurance
market offers flood cover as a standard feature of household policies. Insurance Ireland
estimates that no more than 2% of policies have flood cover excluded, amounting to
about 10,000 policies.
They explained that when assessing risks, insurance companies analyse the history of
the property and any flood prevention measures by the Office of Public Works (OPW) or
local authority. Some policyholders will pay a higher premium because the flood risk is
higher, while others have a higher flood excess on the policy.
According to Insurance Ireland, exclusion of cover is generally a last resort and usually
arises where a property has suffered previous flood damage and it is overwhelmingly
likely that future flood loss will occur. Insurance Ireland witnesses explained that
insurance offers protection against a risk but not against a certainty. Insurance cannot
cover policyholders against an inevitable event on the basis that the cost of premia
would greatly increase for all their policy holders. Insurance Ireland submitted that it is
not tenable to ask policyholders in general to absorb the cost of inevitable losses.
Deputy Kevin Humphreys informed the Committee that over the summer of 2012 he had
surveyed 1,000 households in the Ringsend, Irishtown and Sandymount districts of
Dublin 4 which were affected by the flood event there. He discovered that a significant
number cannot obtain any insurance cover and that the cost for the majority has
doubled.
Deputy Catherine Murphy observed that those living within 500 metres of a watercourse
seem to be routinely refused. She had not come across this until the year 2012. It
seemed to the Deputy that that investment by the OPW in remediation works did not
seem to have any relevance with regard to whether this question was posed to policy
holders and wished to clarify why the insurance companies are asking this question.
Mr. Michael Horan replied that a question on proximity to the source of a possible flood,
a river course or watercourse has been a standard feature of household proposal forms
for a number of years. It is a relevant question for an insurance underwriting
35 | P a g e
assessment. The next question that an insurance company would ask is whether the
watercourse has any flood defences. He explained that this is where Insurance Ireland
engagement with the OPW arises. The OPW is the lead State body for the coordination
and implementation of Government policy on the management of flood risk in Ireland.
The OPW is also the national authority for the implementation of the EU Directive on the
Assessment and Management of Flood Risks [2007/60/EC].
Insurance Ireland tries to understand at an overall level what areas are protected by
flood defences established by the OPW. Insurance Ireland believes that while over the
years the OPW has installed good flood defences there has been an information deficit in
communicating the information to insurance companies. The witnesses declared that
Insurance Ireland and the OPW have a shared interest to ensure that the information is
received by insurance companies so that the benefit gained from the flood defences is
maximised by those living in the protected areas. What Insurance Ireland had
communicated to the OPW is that Insurance Ireland needs to confirm the design
standards to which the flood defences are constructed. Their acceptable minimum
standard is a return period of one in 100 years.
The standard of protection to which Insurance Ireland witnesses referred to is the flood
event against which the flood defences are designed to protect an area. It is usually
expressed as the annual probability of exceeding a particular flood level, such as the 1%
(or 1 in 100) flood (defined below). The flood zones are defined thus in the Planning and
Flood Risk Management Guidelines 2009. 17 They are defined on the basis of the
probability of flooding from rivers and the sea. Because of the generally more dynamic
nature of coastal flooding compared to river flooding, a lower probability of coastal
flooding is used to define the highest-risk zone.
The Planning System and Flood Risk Management: guidelines for planning authorities, November 2009.
Department of the Environment, Heritage and Local Government / OPW. Accessed at
http://www.environ.ie/en/Publications/DevelopmentandHousing/Planning/FileDownLoad,21708,en.pdf
17
36 | P a g e
Zone A is at highest risk and has:

o
a 1 in 100 (or 1%) chance of flooding in any one year from rivers
and
a 1 in 200 (or 0.5%) chance of flooding from the sea.
Zone B is at moderate risk of flooding from rivers and the sea and its outer limit
is defined by a 1 in 1,000 (or 0.1%) chance of flooding in any one year.
Zone C is the low risk area, with a less than 1 in 1000 (<0.1%) chance of
flooding from rivers, estuaries or the sea in any one year.
The definition of these zones does not, however, take account of the potential for
flooding from other sources, such as ground water or artificial drainage systems.
Flooding from these sources could occur in any of the zones and as such should always
be considered, regardless of zone.
In response to a question from Deputy Murphy about whether Insurance Ireland
compiles a blacklist, both Insurance Ireland representatives replied that this does not
occur. They assured her that underwriting decisions and pricing are matters for
individual insurance companies where they compete with each other and do not share
information. They explained that insurance companies examine issues such as the claims
history of individual properties and relevant flood models and then make individual
decisions in competing with each other for business. It is because insurance companies
operate in a very competitive market, they said, that there is such a variety of quotes
for household insurance.
37 | P a g e
3.3 COST OF INSURANCE PREMIUMS

With regard to insurance premiums, Mr. Thompson told the Committee that Insurance
Irelands view is that the marketplace is quite competitive in terms of the 12 general
providers in the market, not including foreign insurers which, under EU Freedom of
Services,18 underwrite business. In fact, he said that premiums had decreased for those
not at risk of flooding while they have increased for those at risk: 19
Premiums have decreased in the past 12 months by 4%. There has been a
4% reduction in insurance premiums - that is an average across the
marketplace confined to household insurance. The insurance costs of a
person who is not in a flood plain or subsidence area and has never made a
claim have decreased by 4%. That is what has happened on average across
the marketplace, according to the latest statistics. Certain policy holders
have experienced premium increases because of the risks that have
presented.
However, Mr. Brendan Dempsey of the Cork Society of St. Vincent de Paul, at a previous
hearing on 12 March 2013, had offered the comment that in localities where the
insurance industry had not opted out of providing cover, it has managed to treble the
price of policies while removing all of its risks.
For an explanation of the procedure involved see the Central Bank of Ireland guidance available at:
http://www.centralbank.ie/regulation/industry-sectors/insurance-companies/non-life-insurancecompanies/Pages/passporting.aspx.
19 Joint Committee hearing of 19 March 2013.
18
38 | P a g e
3.4 THE INSURANCE MARKET

Insurance Ireland stated that high penetration levels of flood cover are necessary if the
current model is to survive, with low-risk areas subsidising higher-risk areas. The
continued availability of Flood Reinsurance is vital as it allows insurers to provide cover
for catastrophic risks by spreading costs over time. They explained how the system
works which is that the government through the lead agency, the OPW, manages flood
risk, constructs structural defences where necessary and, through local authorities,
carries out non-structural measures such as clearing watercourses and drains. That
enables the insurance industry to provide cover against the risk of flooding.
In respect of local authority maintenance of flood defences and clearing of drains,
Insurance Ireland referred to a report by the previous Oireachtas Joint Committee in July
201020 where such recommendations were made. Insurance Ireland urged that follow-up
action be taken on those recommendations of the previous Committee, in particular the
recommendation relating to keeping drains clear and following up with local authorities
in respect of their responsibilities.
See Joint Committee on the Environment, Heritage and Local Government, Fourth Report of the Joint Committee:
The Management of Severe Weather Events in Ireland & Related Matters, July 2010 . Accessed at:
http://www.oireachtas.ie/documents/committees30thdail/j-envherlocgov/reports_2008/20100720.pdf.
20
39 | P a g e
3.5 PROFIT MARGINS OF INSURANCE COMPANIES

Deputy Humphreys referred to the figure given by Insurance Ireland witnesses in respect
of flood payouts over 12 years of approximately 697 million (see table 2). He requested
from Insurance Ireland information as to the profit margins of Insurance Ireland's
members over the past 20 years.
In response, Mr. Kevin Thompson re-iterated the information regarding losses, stating
that the only figures he had to hand at the meeting related to 2008, 2009 and 2010, and
that the figures for 2011 were then being finalised.
Deputy Kevin Humphreys response was that:
Mr. Thompson is giving us a figure as to what the industry paid out on flood
defence over the past 12 years but he is not able to give us the figure of the
profit margins.
We also have to put in the third figure, which is the income of the insurance
companies over that period. There are the costs of flood defence by the insurers
and the costs paid by the OPW over the 12 years but, in the other margin, is
the insurers' income. To look at 697 million in isolation is probably the wrong
manner for this committee to do it. It would be good if Insurance Ireland could
provide the profit margins of its members over those 12 years.
40 | P a g e
3.6 INSURANCE INDUSTRYS VIEW OF FLOOD RISK MANAGEMENT

On 25 September 2012, Insurance Ireland representatives, Mr. Michael Kemp, Chief
Executive, and Mr. Michael Horan, non-life insurance manager, appeared before the
Committee.
The witnesses outlined the Government's policy on flood risk management, which dates
from 2002 with the establishment of the Flood Policy Review Group. 21 They cited the
Review Groups identification of a work programme involving approximately 24 projects
with an estimated cost of 444 million for capital works, to be delivered over 10 to 15
years. In 2004, the OPW was given the responsibility of being the lead agency for flood
risk management. In the seven years after the OPW was given responsibility for flood
risk management - that is, between 2004 and 2011 the witnesses stated that the
organisation was allocated a capital budget of 257 million but has spent only 188
million.
Insurance Ireland submitted that more government investment in structural defences is
needed to preserve flood insurance in high-risk areas and that current levels of
implementation of flood defences need to improve. According to Insurance Ireland,
Government action is also needed in respect of non-structural measures such as
deficiencies in the current Planning Guidelines.
The OPW response was provided to the Committee at a subsequent hearing (see section
3.6.4 below).
21
For further information, see the Report (final) of the Flood Policy Review Group, 2004. Accessed at:
http://www.opw.ie/media/Report%20of%20the%20Flood%20Policy%20Review%20Group.pdf
.
41 | P a g e
3.6.1 PUBLIC AGENCIES ENGAGED IN FLOOD RISK MANAGEMENT

In Insurance Irelands view, recent floods highlighted the fact that too many agencies
and bodies are involved in flood risk management. These comprise the OPW, 34 local
authorities supervising watercourses and drains, Waterways Ireland, the ESB - which
owns 13 of 15 large dams - various Departments, amenity groups, recreational clubs and
environmental and wildlife interests. Insurance Ireland submitted that the number of
agencies involved can lead to confusion and inaction in managing flood risk.
The OPW aims to improve the management of flood risk in Ireland, with particular
reference to the construction of flood defences. Even within the OPWs constraints,
Insurance Ireland believes that there is much that can be achieved. To them it is
important that the OPW communicates reliable information on flood defences to insurers
in an accessible format so that underwriters can satisfy themselves that flood defences
comply with acceptable, measurable standards when assessing risks.
In this regard, they said that insurers need to have confidence in the OPW's review of
standards and commitment to the maintenance of completed flood defences, as well as
these measures:
More investment in structural and non-structural measures;
Establishment by the OPW of a National Flood Liaison and Advice group

comprising all stakeholders, including the insurance industry, to advise on
planning and flood risk management;
A clear, publicly available Flood Relief capital works programme specifying

priorities, budgets, targets and timelines;
Swifter completion of structural defences.
The OPW had begun to develop some sample data, which it had forwarded to Insurance
Ireland, who were considering it with their members.
Deputy Humphreys proposed that the Committee write to the OPW in response to
Insurance Irelands statement about the importance of the OPW communicating reliable
information on flood defences to insurers in an easily accessible format. The Committee
agreed to undertake this course of action.
42 | P a g e
3.6.2 CRITICISMS OF STATE FLOOD DEFENCE PROGRAMME BY INSURANCE IRELAND

In advocating better communication of the details of flood defences that are being
implemented, Insurance Ireland pointed to a Value for Money and Policy review in 2008,
commissioned by the OPW and carried out by Goodbody Economic Consultants.22 They
quoted this review as stating that the OPWs implementation programme had not met its
targets for a number of reasons, including:
Staffing deficiencies;
Diversion of OPW resources to deliver unforeseen projects; and
Lengthy design and planning process for projects.
Given the state of the public finances and the general embargo on public sector
recruitment at the time, Insurance Ireland witnesses were concerned that these
shortcomings may not be addressed and may be exacerbated.
Insurance Ireland witnesses returned to give further evidence at another Committee
hearing on 19 March 2013. The problems identified by Insurance Ireland in the area of
flooding include:
22
Climate change;
Legacy of poor planning decisions;
Under-investment in flood defences;
Under-resourcing;
Lengthy planning process even for small flood defence projects; and
Too many agencies involved in flood risk management.
Accessed at: http://www.opw.ie/media/VFM%20Report.pdf.

43 | P a g e
3.6.3 STATE UNDER-INVESTMENT IN FLOOD DEFENCES

Insurance Ireland advocated an improvement in current levels of investment and
implementation of flood defences. The witnesses argued that the Government capital
budget for flood risk management averaged 37 million per annum between 2005 and
2011, i.e. 222 million for six years. Capital spend on flood risk management averaged
27 million per annum over the same period, that is 162 million over six years. They
placed this in the context of the claims of the cost to insurance companies of the last
four major floods (during 2008-2012) of 520 million.
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3.6.4 RESPONSE BY OPW ON EXPENDITURE ON FLOOD RELIEF WORKS

On 23 April 2013, Mr. Tony Smyth of the OPW gave an outline of how the OPW is
addressing flood risk in critical areas through its capital investment programme for both
major and minor alleviation works. He referred to comments by witnesses at the
Committee's previous meetings who suggested that the OPW is not spending enough on
Flood Relief works. He said that the figures showed this is not the case:
Under the Government's infrastructure and capital investment medium
term Exchequer framework 2012-16, a total of 225 million has been
allocated for capital Flood Relief measures over the five-year period of the
framework. This allocation, when combined with the amount spent by the
OPW on Flood Relief measures since the introduction of the Arterial
Drainage (Amendment) Act 1995 of 320 million, will result in total
expenditure of almost 500 million on Flood Relief up to 2016.
This is a substantial investment by any standard, especially in the current
difficult economic environment, and expenditure to date on Flood Relief
works has brought significant benefits. The OPW estimates that over 5,000
properties have benefited from this investment, with the estimated benefit
in terms of damage and loss avoided amounting to almost 900 million. The
insurance industry has also benefited from this investment as its large
claims payment costs for flooding, which amounted to almost 700 million
since 2000, would have been much higher but for the remedial and defence
works undertaken by the OPW.
Total funding of 21.6 million has been provided since 2009 in respect of
400 projects in the minor and coastal protection scheme. While it is difficult
to know exactly how many properties were protected, the OPW reckons
more than 2,400 properties in addition to the ones mentioned earlier have
varying levels of protection from this expenditure.
45 | P a g e
3.7 LENGTH OF DESIGN AND PLANNING PROCESS FOR PROJECTS

Insurance Ireland witnesses pointed out that the OPW's project implementation process
has six stages. They contended that it takes a considerable length of time to get through
the stages; in many cases it takes between six and ten years to get from design stage to
execution. Insurance Ireland would like to see that accelerated. They suggested that one
way of achieving this is to bring together all interests in a body subject to a certain
degree of control in respect of the time it takes to discuss the issues and reach a
conclusion.
In response to the Committees questions, Insurance Ireland listed OPW projects that
took ten years or longer. For example, they claimed that the St. John's river project in
Waterford was at stage 4 in December 2003 and stage 5 in late 2009. Similarly, that the
Templemore project was at stage 2 in December 2003 and stage 4 in 2009, the Fermoy
project was at stage 1 in December 2003 and stage 5 in 2009. In some cases, it took a
project five or six years to move from one intermediate stage to another.
On 23 April 2013, Mr. Tony Smyth responded to this contention about the length of time
taken on Flood Remediation works:
The OPW appreciates that, especially in the wake of a severe flood event,
there can be an expectation that flood mitigation measures can be
implemented quickly. It is important to point out, however, that major Flood
Relief schemes involve complex engineering and construction operations
that can impact on people's living, built and natural environment and
therefore require lengthy planning and decision lead-in times.
The process, defined by legislation, requires that OPW follow a number of
stages from feasibility through procurement and public consultation to
construction. It is important that the work is done correctly and achieves its
objectives.
Detailed technical analysis is required to establish the most appropriate
solution, technically and environmentally, from
range of possible
mitigation options. Extensive public consultation is required at various

46 | P a g e
stages to ensure that those affected by a scheme have the opportunity to

input into its design and implementation. Ecological and archaeological
issues often require in-depth analysis to inform the technical solution and to
enable the necessary statutory consents to be obtained.
Finally, the process
and time scales for procuring consultants and
contractors, which is governed by EU law, is onerous and has a prescribed

methodology. The OPW at all times strives to expedite and progress capital
Flood Relief works with the minimum delay within the resources available to
it.
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3.8 PLANNING GUIDELINES ON FLOOD RISK MANAGEMENT 2009

Insurance Ireland raised the issue of houses built in flood-prone areas. They cited the
preparation in 2008, by the then Department of the Environment, Heritage and Local
Government, of draft Planning System and Flood Risk Management Guidelines and its
call for submissions. Insurance Ireland had made a submission to the Department in
November 2008 conveying their position that the draft Guidelines were largely a copy of
the UK Guidelines, which had failed to discourage development in flood-prone areas.
Insurance Ireland suggested that the Scottish Guidelines offered a more sustainable
model and called for the establishment of a Flood Liaison and Advice Group with
representation from all interested stakeholders, including insurers. The Scottish
Guidelines discourage new development from taking place on functional flood plains:23
New development should not take place if it would be at significant risk of
flooding from any source or would materially increase the probability of flooding
elsewhere.
The
storage
capacity
of
functional
floodplains
should
be
safeguarded, and works to elevate the level of a site by landraising should not
lead to a loss of flood water storage capacity. Built development should not
therefore take place on functional flood plains.
Nevertheless, the Irish Planning and Flood Risk Management Guidelines 24 published in
2009 allow development in flood risk areas in certain circumstances, using a sequential
approach.
Insurance Ireland witnesses returned to give evidence at another Committee hearing on
19 March 2013, where they elaborated on these points. Insurance Ireland believes that
the 2009 Planning Guidelines (on Flood Risk Management) are deficient and overly
complex. They stated that future availability and affordability of flood insurance were not
considered at the preparation stage. Also, the Guidelines are only advisory in nature and
planning authorities are not obliged to follow them. It believes that there needs to be a
See Scottish Planning Policy: SPP 7 : Planning and Flooding. Accessed at:
http://www.scotland.gov.uk/Publications/2004/02/18880/32953
24 The Planning System and Flood Risk Management: guidelines for planning authorities, November 2009. Department
of Environment, Heritage and Local Government / OPW. Accessed at:
http://www.environ.ie/en/Publications/DevelopmentandHousing/Planning/FileDownLoad,21709,en.pdf
23
48 | P a g e
focus on impact mitigation, and a flood risk management plan for all high-risk areas.
They advocated that all Flood Resources should be considered, flood risk management
plans should be properly funded and resourced and new flood risks should not be
created:
One legacy of the building boom was that many houses were built on flood
plains due to bad planning decisions. This reinforces the importance of taking
flood risk into account when zoning and planning.
The Committee noted that since the 2009 Guidelines were published, the most severe
floods have occurred almost on an annual basis. This indicates the need for a review of
these Guidelines.
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3.9 THE COMMITTEES RESPONSE TO THE INSURANCE INDUSTRYS

POSITION
The Chairman of the Committee referred to paragraph 13 of Insurance Ireland's
submission, which lists recommendations for State intervention, including swifter
completion of structure defences and a more co-ordinated action plan from the OPW.
The Chairman asked, in the case that all these recommendations were implemented,
what could be expected in return from Insurance Ireland? He queried whether Insurance
Ireland would review the practice of zoning based on geocoding.25 The Chairman cited
the need, for example, for business owners who are informed they could not get flood
insurance into the future to be informed of what type of remedial action, if taken, would
facilitate the re-institution of their flood insurance protection.
The Chairman referred to the economic implications by expressing concern that nonprovision of insurance cover could result in the closure of businesses in which profit
margins are so tight that businesses cannot survive the destruction of, for example,
20,000 worth of stock, or the cost of refurbishing their premises. He invited
recommendations from Insurance Ireland in this regard.
The Chairman listed seven points that Insurance Ireland should take into account:
1. Geocoding: need for a Code of Practice regarding problems outlined above;
2. Certification process to allow businesses and households to challenge difficulties
arising from geocoding or from remedial works;
3. Re-examination of the eligibility criteria for household insurance. One concern is
bankruptcy precluding people from getting household insurance, in light of
insolvency legislation;
4. In cases where a business or household can no longer get cover, the insurance
company has a responsibility to explain why;
5. Households or businesses must be given explanations of the remedies necessary
for them to get insurance cover in future;
6. As an interim measure, where a business or household may be unable to get
flood insurance while it is carrying out remedial measures, the introduction of
25
See glossary at Appendix 1 for definition of geocoding.
50 | P a g e
excess payments may be a solution. The parties may agree that the first
10,000 of damage is not covered and;
7. The insurance industry must meet the challenge of climate change and adverse
weather conditions.
The Chairman mentioned European reports that the Irish household insurance industry is
in one of the lowest risk regions in western Europe and the insurance industry is in a
fortunate position. He concurred with Deputy Corcoran Kennedy in suggesting that
Insurance Ireland needs to show leadership and apply innovative measures and
approaches.
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3.10 LACK OF COMMUNICATION BETWEEN PUBLIC AGENCIES AND THE

INSURANCE INDUSTRY
A key difficulty revealed by Insurance Ireland witnesses is that Insurance Ireland
operated somewhat in isolation from the OPW and local authorities. Sometimes there
was a failure to consult in advance or to ensure that the measures were adequate
regarding risk assessment, which is the role of underwriters. A development in recent
years disclosed by Insurance Ireland is that there has been more engagement on a
bilateral basis between Insurance Ireland and the OPW. The flow of information is much
improved and Insurance Ireland are much more involved.
3.11 INSURANCE INDUSTRY MEASURES TO IMPROVE COVER

Insurance Ireland stated that they would like to get to a stage at which there is a
standing liaison group, with others, not only Insurance Ireland, involved. In such a
liaison group, insurance industry expertise could be utilised in planning and executing
flood defence works and in identifying problem areas. Over the past several years
Insurance Ireland has supplied information to the OPW to ascertain whether the OPW
can match its priority areas with locations where insurers have made significant pay outs
on claims.
The idea is that if effective measures are taken, which will include insurance industry
participation in design and an agreed standard of the built defences, there will be greater
availability of cover in areas that were previously a problem. The claims cost associated
with flooding, subject to frequency and climate change issues, will go down, all other
things being equal, and therefore the insurance cost will go down.
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3.12 INSURANCE INDUSTRY REQUIREMENTS FOR SUSTAINABLE PROVISION

OF INSURANCE
The themes presented by Insurance Ireland witnesses in September 2012 were further
developed
at
Committee
hearing
on
19
March
2013
by
Insurance
Ireland
representatives, Mr. Kevin Thompson, Chief Executive Officer, and Mr. Michael Horan,
non-life insurance manager.
Insurance Ireland witnesses stated that it is not tenable to ask policyholders in general
to absorb the cost of losses, nor is it sustainable from an insurance business model
perspective. Insurers spread risk throughout the world through the mechanism of
reinsurance. Therefore, it is vital that insurers act prudently with regard to flooding risks
to ensure that affordable reinsurance cover is maintained for all policyholders.
The elements identified by Insurance Ireland as necessary for the sustainable provision
of insurance are:
Availability of flood mapping and accurate data to facilitate risk assessment;
High insurance penetration levels to prevent adverse selection; 26
Continued availability of re-insurance;
Investment by the Government in structural and non-structural measures; and
Deficiencies in Planning Guidelines on Floods to be rectified.
Insurance Ireland stated that what insurers need from the OPW were:
Maps in GIS (Geographic Information System) format showing likely flooding

extent;
Area maps showing the likely extent of protection offered by remedial works;
Status of remedial works, such as those deemed to be priorities, in progress,

etc.; and
That flood defences be constructed to minimum accepted standards.
They said that Insurance Ireland and the OPW have a common interest in ensuring that
information on completed flood defences is provided to insurers.
26
See Glossary at Appendix 1 for definition of adverse selection.
53 | P a g e
3.13 FLOOD DEFENCES: CALL FOR THE OPW AND THE PROPERTY
INSURANCE INDUSTRY TO CO-OPERATE ON DESIGN AND STANDARDS
Several Committee members complained to Insurance Ireland witnesses about cases of
insurance companies ignoring local authority engineers letters certifying flood defences
and declining policyholders requests for a renewal of flood cover regardless. Committee
members called for a certification process which would be accepted by insurers.
Mr. Kemp replied that what Insurance Ireland needed was not just provision of
information after the event, but involvement in the design process and agreeing
standards before the event. Underwriters decisions depended on agreement on what the
standards are in advance, both for design and construction of the flood defences. What
Insurance Ireland was suggesting is that there should be wider consultation at an earlier
stage in the design so it is agreed that what is proposed will meet an acceptable
standard. Mr. Kemp said that there will be occasions when insurers will stand over their
belief that there is a logic to underwriting decisions. But there are cases where mistakes
are made and Insurance Ireland persuades underwriters to change their opinion and to
reinstate cover or to change the terms clashing with the cover in those cases. In
addition, in areas where works have been carried out, there have been changes in the
attitudes of underwriters to insuring risks in those areas.
Mr. Thompson elaborated that Insurance Ireland are looking to the OPW to verify the
flooding defence work carried out. It is not a question of receiving a letter from an
engineer; they want to work through and fully understand the technicalities and make
sure the defences are built to the required standard. If they are, Insurance Ireland will
look to their members to incorporate this as part of their underwriting criteria. But he
admitted that it matters at an early stage and as the process evolves, they may have to
involve other agencies in the dialogue to ensure that a holistic approach is adopted. He
pointed out that insurance is only one element of the picture and reminded the
Committee of a previous Oireachtas Joint Committees report published in July 2010 in
which numerous recommendations were made, including keeping drains clear, which is
54 | P a g e
the local councils responsibility.27 He urged that this issue be addressed as much as the
work that Insurance Ireland is doing with the OPW.
27
See Joint Committee on the Environment, Heritage and Local Government, Fourth Report of the Joint Committee on
The Management of Severe Weather Events in Ireland & Related Matters, July 2010. Accessed at
http://www.oireachtas.ie/viewdoc.asp?fn=/documents/Committees30thDail/JEnvHerLocGov/Reports_2008/20100720.pdf
55 | P a g e
3.14 FOUNDING OF INSURANCE IRELAND - OPW WORKING GROUP

Following their dialogue with the Committee in September 2012, Insurance Ireland
informed the Committee that they had 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 is for Insurance
Ireland and the OPW to work together towards the provision of OPW information on
completed flood defences in line with Insurance Ireland's requirements in order that
insurers can take this information into account when assessing risk in respect of private
dwellings.
The scope of the Working Groups work is to establish:
Areas for which flood defence information will be provided;
Format in which the information will be supplied;
Agreement on a delivery date for sets of completed flood defences; and
Agreement on frequency of updating the information.
Insurance Ireland witnesses told the Committee in March 2013 that the Working Group
had started its work at its first meeting in January. They need to fully understand the
technical data as presented by the OPW and put this data into a format that both parties
can understand. Once they fully understand this, they will try to incorporate it into their
industry members' underwriting criteria.
When we attended a meeting of this committee in September last year, we
were asked how a person in one of these [geo-coded] areas can get out of it.
We are working with the OPW through our flood working group. We are getting
information from the OPW on digital files that show the areas which are
protected by flood defences. Historically, insurance companies have not had
that information when they examine at-risk areas. The new data coming from
the OPW will enable them to amend their lists of at-risk areas to take account
of flood defences that have been built.
Mr. Paul Kavanagh, a claims specialist, commented on 16 April 2013 that Insurance
Ireland reported that it had been in consultation with the OPW and that this has been the
56 | P a g e
case only since January 2013. In his view, there needs to be constant and meaningful
dialogue, and that it should be published.
Deputy Kevin Humphreys referred to Mr. Kavanaghs observation that engagement
between the OPW and Insurance Ireland began to take place in January 2013 and stated
that this is a direct result of the work this Committee has done in highlighting the OPW's
work and the lack of communication.
The parties are still trying to talk the same language. The OPW operates to an
international standard applying the figures of 100, 150 and 200. Insurance
Ireland is dragging its heels regarding the acceptance of the international
standards. The talks should now be concluded. We know the international
standards and the bill design. In fairness to the OPW, it is very professional.
Where I have seen its work done, it has been to a very high standard.
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3.15 PROGRESS OF THE INSURANCE IRELAND OPW WORKING GROUP

On 23 April 2013 Mr. Tony Smyth, Director of Engineering Services at the OPW, gave
evidence to the Committee on the progress of the joint Insurance Ireland - OPW working
group, which includes also representatives of the main insurance companies operating in
the Irish market. He said that the comprehensive Catchment Flood Risk Assessment and
Management, (CFRAM) programme to identify and assess flood risk nationally will, in
time, enable the insurance industry to take decisions on the provision of cover based on
the fullest assessment of that risk.
Mr. Smyths account was updated in October 2013 when, subsequent to the Committee
hearings, Deputy Humphreys raised the issue of Flood Risk Insurance Cover in the Dil
as a topical issue. The Minister of State at the Department of Jobs, Enterprise and
Innovation, Deputy John Perry, on behalf of the Minister of State at the Department of
Finance, Deputy Brian Hayes, briefed him on the progress of the new Insurance IrelandOPW Working Group:28
The discussions between the OPW, Insurance Ireland and the insurance
companies are concerned solely with agreeing a basis on which information can
be provided to the insurance industry on Flood Relief schemes completed by the
OPW and the standard of protection offered by those schemes.
The discussions have been complex and quite technical in nature and it is
important that all matters are addressed in a comprehensive way that will
ensure that the system of data exchange is robust, reliable and sustainable. I
am happy to report that the working group has made very good progress and
agreement has been reached on a data-sharing platform which will facilitate the
transfer of detailed information on completed OPW Flood Relief schemes. This
will allow the insurance industry to properly take into account the levels of
capital investment in flood protection measures over several decades by the
See Dil debate. Flood Risk Insurance Cover. Accessed at:

http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2013102300031?ope
ndocument.
28
58 | P a g e
OPW when assessing flood risk in localities where such flood measures have
been completed.
The information being provided is in a readily accessible format which will show
in digital map files the areas benefiting from completed flood defence works.
The initial focus of the group's work is the provision of information on schemes
which provide protection for the one in 100 year flood. The OPW has provided
an initial batch of information to the insurance companies and the latter are
currently working on integrating this information into their own individual
operating systems. It is expected that this work will be completed shortly.
It is intended that the OPW and Insurance Ireland will agree a memorandum of
understanding to guide present and future interaction between the insurance
industry and the OPW in regard to communications around completed flood
defence works. The OPW is satisfied that the insurance industry is engaging
constructively and positively in this process and that there is a strong
willingness to co-operate on implementing a sustainable system of information
exchange.
Ultimately, it is a matter for the insurance companies themselves to decide how
they will use the information provided on completed flood defence works. As
part of the process they are committing to take the information into account in
their assessment of risk and it is to be hoped that this will facilitate the
provision of flood cover in all areas that are protected by completed schemes.
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3.16 FLOOD MAPS AND CFRAMS (CATCHMENT FLOOD RISK ASSESSMENT

AND MANAGEMENT)
Another requirement identified to the Committee by Insurance Ireland witnesses was
more accurate flood maps to establish not just the area relative to a watercourse (or a
similar hydrological feature) but where the risk is, taking into account the local
topography. In their submission to the Committee, Kildare County Council described the
partnership between the OPW and local authorities in carrying out the Catchment Food
Risk Assessment and Management (CFRAM) studies.
The CFRAM Programme delivers on core components of the National Flood Policy 29 ,
adopted in 2004, and on the requirements of the EU Floods Directive. The Irish CFRAM
programme is being carried out in parallel with similar programmes across the European
Union.
The OPW is the lead agency for flood risk management in Ireland and is the national
competent authority for the EU Floods Directive. OPW works in close partnership with all
Local Authorities in delivering the objectives of the CFRAM Programme. Kildare County
Council is working in partnership with OPW on both the Eastern CFRAM Study and the
South Eastern CFRAM Study which deal with the River Liffey and River Barrow
respectively.
At a Committee meeting on 23 April 2013, Mr. Smyth of the OPW described to the
Committee the expected outcomes of CFRAM, OPWs major flood mapping project.
The OPW is overseeing the most comprehensive national initiative to
systematically identify, assess, document and report on the most significant
flood risks throughout the country. The CFRAM programme will generate
detailed flood maps showing flood extents and other flood parameters such as
depth and velocity. They will recommend an integrated management plan and
prioritised measures to address flood problems in areas of significant risk in
each major catchment in the country.
Report of the Flood Policy Review Group, September 2004, Office of Public Works
http://www.cfram.ie/pdfs-downloads/Flood_Policy_Review_Group.pdf
29
60 | P a g e
The CFRAM programme will inform the long-term planning of flood risk
management measures throughout the country, including structural and
constructed flood defences and non-structural measures. Both the flood maps
and the identification and outline design of flood risk management measures
under CFRAM will consider a range of potential future scenarios, including the
potential impacts of climate change, to ensure capacity for adaptation is built
into the flood risk management strategy and measures.
The output from the CFRAM programme in a recent pilot project included the
production of 1,100 maps showing flood extents, depths and velocities.
Approximately 250 km of channels were surveyed and more than 275 sq. km of
detailed flood plain modelling was carried out. This project required the
development of nine hydraulic models of the river and its tributaries and the
production of various reports, including an inception report, a strategic
environmental assessment at scoping level and final report stage, a hydrology
report and hydraulic reports. Ultimately a catchment flood risk management
plan was drawn up.
Deputy Catherine Murphy expressed a concern about the CFRAM study, which is
mapping the flood areas. She accepted that when a risk is captured in the study,
remedial works can take place. However, the Deputy was concerned that there is a risk
is that insurance companies will be given a new set of locations from the Study that they
may wish to exclude from providing cover for. This fear may not be unfounded if the
Irish experience follows the UK experience. It was reported in a United Kingdom
newspaper (the Times) that thousands of homes could lose value and become more
expensive to insure after the publication (in December 2013) of the first official maps
showing areas at risk of surface-water flooding.30
31
From December 3, the Environment Agency will make the maps available
on its website. Where there is a risk, it will be shown as high, medium or
low, equating to chances of flooding of one in 30, one in 100, and one in
1,000.
Flood maps may hit house prices, Irish Times, 15 November 2013.
It was reported in the BBC on 15 January 2014 that new maps were being made available online to the public
showing areas at risk of flooding in Scotland. See: http://www.bbc.co.uk/news/uk-scotland-25743338.
30
31
61 | P a g e
Anyone will be able to check the surface-water flood risk for an area by
typing in its postcode. At present, it is possible to search only for flood risk
posed by rivers and the sea.
About 3.8 million homes in England and Wales are at risk of surface-water
flooding, usually caused by rainwater pooling after intense downpours
because drains are blocked or cannot cope with the volume.
Many people do not realise their homes are at risk of surface-water flooding
because the threat is much less obvious than for those affected by river or
coastal flooding.
Of the 55,000 properties flooded in summer 2007 the most recent severe
and widespread floods 35,000 were affected by surface water.
Craig
Woolhouse, the
Environment
Agency's head
of flood
incident
management, said many people might have bought a property without

realising the risk.
If you look at the evidence from river and coastal flood maps, then
clearly some people are having difficulty securing insurance at affordable
rates. That may be an issue for some properties identified on a surfacewater map.
Mary Dhonau, chairwoman of the Flood Protection Association, which
represents flood-protection businesses, said that some properties would be
unfairly blighted by the maps, which were not detailed enough to give a
precise assessment of the risk for each house.
They are not property specific and it could be that the flood risk shown
affects properties down the road rather than your one..32
32
Ibid.
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3.17 FLOOD WARNING SYSTEMS

Insurance Ireland witnesses also remarked that a feature of recent floods was that
businesses and residents were given little or no warning. That is a serious shortcoming
in flood-prone areas, which they said needs to be addressed urgently through the
development of better early warning systems when there is an imminent risk of flood.
A similar complaint about inadequacy of flood warnings was made by the Irish Farmers
Association (IFA). While some local authorities have co-operated with the OPW to
provide a local Flood Early Warning System (for example, Cork County Council) there is
as yet no national service similar to the Floodline 33 operated by the UK Environment
Agency. This Floodline gives Flood warning information and advice at local and national
level, via a website and a phone line.34
33
See UK Environment Agency https://www.gov.uk/government/organisations/environment-agency
34
See http://www.environment-agency.gov.uk/homeandleisure/floods/31618.aspx
https://fwd.environment-agency.gov.uk/app/olr/home.
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4. INSURANCE CLAIMANTS POSITION

4.1 THE SITUATION OF PROPERTY-OWNERS EXCLUDED FROM FLOODING
INSURANCE
Mr. Enda O'Donovan introduced the Irish National Flood Forum as a voluntary
organisation whose members have suffered from flooding and are at risk. He told the
Committee that these people cannot get insurance, mortgages cannot be obtained on
their homes by potential buyers and the value of their homes has plummeted.
In the previous year, Mr. ODonovan said that he had been contacted by people from
Dublin, who had experienced the results of catastrophic rainfall in a very short period in
October 2011. He stated that the probability of that type of rainfall returning is 1 in 350
or 1 in 400 years, but he had been told that the insurance industry has withdrawn cover
in that locality. That means that a person cannot sell such a house if those who want to
buy it cannot get a mortgage. Mr. ODonovan said that the Society of Chartered
Surveyors may say that the house is saleable, but it has hugely diminished in value
because the only person who can buy it is someone who does not need a mortgage. He
mentioned that the Revenue Commissioners acknowledge that those who do not have
flood insurance cover should mark that on their property tax self-assessments. He
referred to the evidence given by the Ms. Josephine Feehily, Chairman of the Revenue
Commissioners, to a hearing of the Committee of Public Accounts on 21 February 2013,
that flooding will impact on property tax valuations. 35
Mr. ODonovan hoped that the Revenue Commissioners understanding of this issue will
enable the OPW to get further funding to speed up the Flood Relief programmes across
Ireland. He cited figures released by the Irish Brokers Association, who, after collating
and analysing data from insurers, Insurance Ireland and the Irish Brokers Association's
own data from its members, have estimated that up to 50,000 households have no flood
risk insurance or are at risk of losing flood risk cover across the Republic.
Dil ireann Committee of Public Accounts Debate. Accessed at:

http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/committeetakes/ACC20130221
00012?opendocument
35
64 | P a g e
Mr. ODonovan asserted that 50,000 people will note this point on their Local Property
Tax self-assessment forms. He remarked that while the insurance industry will state that
only 2% are not covered by insurance, that equates to 50,000 units.
Mr Horan, in a subsequent intervention, queried this figure:
I am not sure how the figure of 50,000 was arrived at but at our end we
think the 98% penetration rate is accurate, and is far higher than what
exists in other European countries.
Mr. ODonovan defended the figure of 50,000:
Insurance Ireland, Insurance Ireland, says that 2% is not covered. If one
looks at other information it has, that equates to 38,000. I do not know
where it got the 10,000 figure. The Irish Insurance Brokers Association
maintains that 50,000 are uninsured.
Being uninsured has nothing to do with flooding, and the figures for flooding
could be as low as less than 20,000.
Mr. Brendan Dempsey of the Cork Society of Saint Vincent de Paul told the Joint
Committee in March 2013 that approximately one fifth of property in Cork city cannot at
present be sold due to the inability of people to obtain a mortgage because they cannot
obtain insurance.
Mr. Paul Kavanagh (of the Irish Brokers Association) on 16 April 2013 introduced himself
to the Committee as a broker with over 32 years of experience on the flood plains of
Cork county and city, with a strong database on the flooding issue. He himself was
flooded in Fermoy over 20 years ago. He cited a survey by the Irish Brokers Association
of all its members in the 26 counties which combined the information with available
insurance company statistics and found that there are between 40,000 and 50,000
properties, at least, without flood cover. He said that they are trying to put a figure on it.
The estimates of uninsured households given to the Committee therefore range from
10,000 to 50,000.
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Deputy Kevin Humphreys observed that judging by the calls TDs get, the figure of 98%
policyholders having flood cover does not seem realistic to him. He believed that the
figure from the Irish Brokers Association is probably more realistic. He queried from
what period the figure of 98% was taken.
Mr. Michael Horan of Insurance Ireland replied that it was taken some 12 months
previously (i.e. in spring 2012) from their insurance company members and from their
understanding of the level of existing flood risk cover.
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4.2 ISSUES ARISING FROM GEO-CODING

In regard to the insurers use of geo-coding, 36 the Irish National Flood Forum (INFF)
quoted an Irish Insurers Brokers Association (IBA) contention that geo-coding, although
useful for insurance companies, is not accurate and can leave swathes of properties
uninsurable, despite no history of flooding in the area.
They claimed that geo-coding can also ignore remedial works put in place by the OPW
and local authorities which render areas less prone to flooding. Furthermore, they
maintain that those who have a claim or lose or do not renew their cover will never get
cover again. The terms imposed by previous insurers must be declared to all future
insurers. The IBA also asked why the insurance providers in Ireland whose head offices
are in Europe and America treat the flooded public in Ireland differently from the public
in their home countries.
The Committee Chairman also identified the insurance companies practice of geocoding
as central to the problem of uninsurable households:
The EU report indicated that Ireland is one of the safest countries for the
insurance business and that we present a far lower risk than any other
country in Europe. Therefore, the insurance industry here should be
performing at a high level. However, if the model it pursues is to continue,
it will not be 98% [with flood cover] in the future, and at the centre of this
is geocoding. If I live in an area that has been geo-coded, why is there no
mechanism for me to get my property out of that geocoding? The insurance
industry is not taking a specific examination of the property but is applying
a general rule.
The Chairman raised with Insurance Ireland the risks of this issue, alluding to economic
consequences such as businesses closing down and houses remaining unsold because of
geocoding. He queried whether the insurance industry is contributing to the mortgage
crisis because people cannot sell their homes and escape from mortgage debt as houses
36
see Glossary at Appendix 1 for definition of geo-coding.
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cannot be bought because of geocoding. He urged that solutions be provided by

Insurance Ireland.
However, the Insurance Ireland rebutted these assertions, stating that it does not set
guidelines for individual insurers or get involved in individual underwriting matters:
The Chairman is making the assumption that the industry as a whole is
taking a decision on a particular matter. Individual insurance companies
compete with each other.
It is not uncommon for one insurance company to examine its individual
claims costs and decide to offer cover while another insurance company
decides not to, because their risk portfolios are different as are their claims
costs Various underwriting decisions are taken on the same risk by various
companies. We are not dealing with a monolithic industry attitude.
Insurance companies make their individual underwriting decisions on the
basis of the information available, and geographical location is an important
rating factor. Insurance companies use their claims experience, secondary
data and flood models, etc.
In fact, Mr. Horan in September 2012 asserted that, far from applying a general rule,
geocoding pinpoints a property:
The geo directory 37 gives exact geocodes for each building and pinpoints
the property. Without geocoding, risks would be assessed on a blanket
basis. It would be assumed that all properties within a geographical area
are at equal risk of a flood.
He said that geocoding enables insurers to see that, for example, one side of a street is
within a flood hazard area and the other side is not. Rather than excluding all areas in a
blanket manner, he noted that geocoding depicts graphically what buildings are within a
flood hazard area and what buildings are not.
37
Geo directory: a directory that identifies every property in the country, developed by GeoData Surveying Limited.
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If this is the case, the Joint Committee is at a loss to understand how so much evidence
was presented of properties that had not been flooded and the property owners were still
refused cover or had their premia increased. The Joint Committee is of the view that this
issue requires a systematic investigation and calls on the Central Bank of Ireland to
conduct an inspection into this issue, using a significant sample of insurance claims, and
advise accordingly.
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4.3. COMPETITION IN THE INSURANCE MARKET

Mr. O'Donovan of the Irish National Flood Forum suggested that no insurance provider
will even quote for home insurance if a person has made a claim in the previous five
years. He contended that there is no competition in the provision of insurance in Ireland
and posed the question as to whether insurance providers in Ireland are acting as a
cartel to increase their profits from the Irish market. 38
This suggestion was rebutted by Mr. Kevin Thompson, who declared that:
Within Insurance Ireland, we have EU & Irish Competition Law Guidelines, so when
our members meet in a forum this is the guideline they must follow. 39
Mr. Horan also refuted the allegation:
In regard to talk of cartels, etc., we would refute that allegation in the
strongest possible terms because the Irish household insurance market is
very competitive. There are at least 12 insurance companies offering
household insurance cover, with many others writing into Ireland under EU
Single Market rules. The market is very competitive and there is a huge
range in quotation prices for a person looking for same. People bandy
allegations about cartels but nothing could be further from the truth.
38
A cartel is an explicit agreement among competing firms to fix prices or production. Cartels usually occur in an
industry where there is a small number of sellers. The aim of such collusion is to increase individual members' profits
by reducing competition.
39
In correspondence with the Committee Secretariat

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4.4 INSURANCE CLAIMANTS PROBLEMS IN CLAIMING

Mr. Enda O'Donovan referred to surveys which the Irish National Flood Forum had
conducted in various locations. He noted a finding of the Irish Brokers' Association that
the majority of claimants who actually received a payment are unhappy with the level of
support given by their insurance company. He quoted another finding that even though
respondents have spent on average between 3,895 and 6,969 of their own money on
flood mitigation measures, not one insurance provider asked about, or took account of,
these measures when refusing flood cover.
4.4.1 RETENTION OF INSURANCE PAYMENTS

Mr. ODonovan stated that individual claimants are being forced to employ loss assessors
or claims professionals in order to achieve realistic settlements, and then find that 30%
to 35% of the agreed sums are being retained by the insurance company. Retention is
the term for the insurers practice of providing advance payments relating to the costs of
repair / reinstatement (which allows repairs to be undertaken)and paying the balance on
receiving a final invoice from the claimant.
Mr. Brendan Dempsey (SVP) explained that the Society of St. Vincent de Paul has been
having considerable trouble with the insurance industry. A considerable portion of these
problems pertain to the retention of claims, that is, where the insurance companies can
hold back up to 30% of money. Where insurance companies retain monies until a job
has been completed and receipts produced, the owner of the house must find the money
to have the job done. Many of the clients SVP deals with are not in a position to do so
because they may have to come up with 20,000 or 30,000.
In the view of SVP, some claimants are put under huge pressure to accept offers made
by the insurance company. Since 2009, Mr. Dempsey told the Committee, the Society of
St. Vincent de Paul has spent more than 1.8 million nationwide in dealing with direct
building and repair of houses, approximately 408,000 of which was spent in Cork. He
explained that most SVP clients submit claims for precisely what it costs to carry out the
necessary
work but
that
the insurance assessors contest
these claims. As a
consequence, he said that the claimants end up with a shortfall of many thousands of
euro. He gave the example of one neighbourhood of 42 houses after the 2012 Cork
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flooding, where the shortfall between what insurance paid out and what the builder
required ranged from 1,000 to 17,000. Mr. Dempsey told the Committee that the
Society of St. Vincent de Paul cannot afford another flood as they have a severe call on
their funds.
On 16 April 2013, Mr. amonn Downey, acting president of the Irish Claims Consultants
Association, agreed that the practice of retentions was giving rise to problems. Based on
their experience in the Cork floods in particular, he alleged that insurance companies
retain part of agreed claims settlements incorrectly and contrary to their practices
outside of Ireland. Many of the companies are headquartered outside Ireland and Mr.
Downey stated that they behave differently abroad.
One unintended effect of the retentions practice, according to Mr. Downey, is that it
appears to foster an atmosphere in which householders engage VAT-unregistered
contractors to carry out repairs, thus saving them money.
According to Mr. Downey, insurance companies used their builders' price as a measure of
indemnity or how much should be paid. They have the fall-back position that their
builders are available to carry out repairs for this price. However, the agreed rates are
not representative of the construction market and give rise to an issue that Mr. Downey
said should concern the Committee, namely, builders operating in the black market.
They attempt to use builders from panels they have set up, thereby removing the right
of choice and attempting to use a scope of works that does not represent the damage
caused. Variants of this scheme include insurers insisting on using unrealistic prices to
which they refer as agreed rates for repair work. As a former loss adjuster, Mr. Downey
spoke of his sadness at seeing them force these practices on loss adjusters, the majority
of whom are professionals. For this reason he welcomed the forthcoming whistleblower
legislation (Protected Disclosures Bill 2013)40 and hoped for the emergence of individuals
who will reveal the inside stories of insurance companies practices.
It seemed to Mr. Downey that in order to achieve more profit, companies have changed
their attitude and culture. According to him, the retention practice is not evident in
Belfast or Bristol. If loss adjusters from Belfast are sent to a major flood in Galway, the
40
Subsequently enacted on 8 July 2014 as the Protected Disclosures Act 2014.

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circumstances described do not arise. Retention has been introduced in this State and
Mr. Downey said that the companies are getting away with it.
In response to questions from Committee members on the issue of insurance companies
practice of retentions seeming to lead to a tendency of policyholders to use unregistered
contractors, Mr. John O'Donoghue, managing director of a claims specialist firm, clarified
this issue:
Our feeling, which is based on anecdotal evidence, is that policy holders
will use competent and registered contractors when they know they will be
compensated properly by their insurers. If they receive less than a full
indemnity at the outset, that encourages them to use unregistered
contractors. That is what Mr. Downey meant when he said it is fostered by
insurance companies. At this point, they must have a decent idea that this
is what is happening. Fewer and fewer people are coming back to claim the
retained portion of the agreed settlement. They are not coming back
because they cannot provide the documentary evidence required.
4.4.2 FAILURE TO ADVISE CLAIMANTS OF RIGHT TO THEIR OWN REPRESENTATIVE

Mr. Downey also alleged that insurers have ignored the Consumer Protection Code by
not giving a true commitment to advise homeowners who notify a claim of their right to
retain their own representative.
In his opinion, companies encourage an adversarial and combative approach in their
investigation and handling of claims. He suggested that this is particularly common
where a householder employs his or her own assessor.
As a result of these practices, he believed that the amount of claims and the amounts of
settlement are usually a distance apart.
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4.4.3 PROBLEMS IN COMPARING INSURANCE QUOTES

According to Mr. Dempsey (SVP), another problem was discovered by the SVP in the
case of policyholders shopping around four or five different insurance companies. One of
the companies might say No, we are not interested. If the policyholder then decides to
stay with the existing company, what they may not realise is that the insurance
company that refused to provide a quote is refusing cover. They enter ones name and
address into a central statistical log for all insurance companies. If, any time after that,
one makes a claim, the first thing ones insurance company will do is to see whether one
has been refused insurance and there it is in front of them. Accordingly, one is construed
to have made a false declaration and one is not insured. Mr. Dempsey stated that people
are not able to deal with such technology.
Both Mr. Horan and Mr. Thompson replied that Insurance Ireland has an information
service line that deals with complaints and queries from members of the public, such as
the availability of cover or questions regarding claims. The line deals with motor and
household insurance and other business. On average, Insurance Ireland receives
approximately 2,000 calls with a rate of successful mediation of approximately 60% to
date, they said. They were unable to provide a breakdown of successes in motor or
house insurance. They divulged that complaints on availability of flood insurance cover
would be in the low single figures each month, and that it is not possible to generalise
from one or two examples.
Deputy Humphreys later questioned Mr. Dempsey (SVP) about the proposal form asking
that a person who has been refused insurance by another insurance company to make
that disclosure. If that is not disclosed to the original insurance provider, does that make
the insurance policy with that provider null and void?
Mr. Brendan Dempsey answered in the negative as, he said the householder took on the
original contract on the grounds and questions asked on day one and, provided he
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answered all the questions honestly and disclosed all the relevant information as asked
for at that time, he is covered.
41
In correspondence with the Committee Secretariat, the Central Bank stated while they have not
conducted a themed inspection or review into the specific issue as described, the bank is aware that some
firms have included a condition in an assumptions section, or in the terms and conditions, and often the
consumer must click to confirm they understand:
41
"You are only eligible for a quote and cover if you and anyone living in the home have never been
refused insurances, had a policy cancelled by an Insurer or had any special terms, restrictions or
conditions imposed by any Insurer.
The Central Bank added that their Consumer Protection Code requires that all such terms and conditions
are made clear to the consumer.
Combined with the doctrine of uberrima fides, it would appear that if such a condition was included in an
insurance contract, failure to disclose a refusal to provide insurance could invalidate an insurance
contract, including a renewal of a contract.
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4.5. CENTRAL BANK FINDINGS ON HOUSEHOLD PROPERTY CLAIMS

RESULTING FROM WATER DAMAGE
Subsequent to the Committees hearings, the Central Bank on 24 October 2013
published its findings of a Household Property Claims Themed Inspection into household
property claims resulting from water damage.42 The Central Bank considered these types
of claims given the increased frequency of floods in recent years. The inspection
examined compliance with the Consumer Protection Code between 1 July and 31
December 2012 in 10 of Irelands largest non-life insurers (approximately 90% of the
Irish property insurance market). Desk-based research was undertaken in 10 firms, and
on-site inspections were undertaken in 7 of these firms between April and June 2013. A
total of 188 claim files were reviewed.
The main issues identified during the inspection include:
weak oversight and controls over outsourced claims handling (Loss Adjusters);
isolated incidences of potentially unfair settlements; and
a lack of transparency around the practice of insurers retaining a portion of the

agreed settlement (typically 30%) until reinstatement has been completed and
final invoices have been submitted (known as retention) and the extent to which
consumers are not claiming the portion retained.
The Central Bank issued an industry letter drawing the attention of insurers to the
inspections findings and emphasising the requirement to be in full compliance with the
Code when handling claims, either directly or through a third party. The Central Bank is
following up directly with the insurers inspected, and is also considering whether
enforcement action is appropriate in some cases.
On the issue of retentions, the Central Bank stated that:
Accessed at: http://www.centralbank.ie/press-area/pressreleases/Pages/CentralBankpublishesfindingsfromtheHouseholdPropertyClaimsthemedinspection.aspx.

42
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All of the insurers have a practice whereby a retention amount may be applied to
a claim settlement offer and typically the retention withheld would be between
20% and 30% of the settlement amount. In order for a retention amount to be
paid, consumers are required to provide either receipts, invoices or other proof
that the repairs have been fully completed. The Central Bank noted that 23% of
the monetary amount of all household property (water damage) claim retentions
applied by the 7 inspected insurers during 2012 were never claimed by the
consumer; and
A review of insurers policy booklets revealed that only one of the insurers clearly
describes the practice of retentions in its policy booklet. Insurers have been
requested to make clearer their policy on retentions at the time of the product
being purchased and again when a claim is instigated.
On the issue of Loss Adjusters, the Central Bank stated:
All of the insurers engaged at least one Loss Adjuster firm to settle claims on
their behalf. The review
identified
that
Loss Adjuster
firms had
issued
introductory letters to consumers which did not clearly state they were acting in
the interest of the insurer who had engaged them, or explained that the
consumer could appoint, at their own expense, a Public Loss Assessor to act on
their behalf; and
Given the number of suspected breaches of the Code, the majority of which had a
minor impact on consumers, it was evident that monitoring of Loss Adjuster firms
by some of the insurers was ineffective. Examples of suspected breaches
originating from the activities of the Loss Adjusters include the failure to inform
claimants that they act in the interest of the insurer and failure to advise
claimants that they have the right to appoint a Public Loss Assessor at their own
expense.
On the issue of Suspected Unfair Settlements:
The Central Bank suspects that unfair settlement offers had been made in a small
number of claims which is a breach of Provision 7.15 of the Consumer Protection
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Code.43 In a small number of cases, insurers or their representatives were found

to have made decisions to decline claims without fully validating the claim or
made offers which were significantly lower than the value of their best estimate
when all of the facts relevant to the claim were taken into consideration. The
Central Bank is carrying out further investigations to determine whether these are
isolated incidences and where consumer detriment is identified, insurers will be
required to take appropriate action.
Accessed at: http://www.centralbank.ie/regulation/processes/consumer-protectioncode/documents/consumer%20protection%20code%202012.pdf

43
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4.5.1 RESPONSE OF INSURANCE IRELAND TO CENTRAL BANKS FINDINGS

In response, Insurance Ireland said that the findings outlined in the Central Banks
Household Property Claims Themed Inspection are not an accurate reflection of the
market.44
The sector handled over 70,000 household claims in 2012 but the Central Banks report
is based on just 188 claims. Insurance Ireland said that Insurers have been very
successful in their objective of achieving fair and just settlements with their customers
within the terms of their policies.
On the issue of retentions, Insurance Ireland says that insurers generally provide
advance payments relating to the costs of repair / reinstatement in advance of receiving
final invoices from the claimant. This is done for the benefit of the customer and allows
repairs to be progressed quickly with the balance paid promptly on receipt of a final
invoice. There was no suggestion in the Central Banks statement that the balance was
not paid when the invoices were submitted. Insurance Ireland believes it is entirely
reasonable to ask a customer to provide a final invoice before a final payment is made.
On Loss Adjusters, Insurance Ireland declared its confidence that Loss Adjusters are a
highly professional group, operating to high standards. If there have been instances
where written communications between loss adjustors and customers were not clear
then that will be addressed. However, Insurance Ireland also notes that while the Central
Bank have analysed the practice of Insurers and Loss Adjusters, they have not analysed
the practice of Public Loss Assessors. This, they feel, is an omission and suggests a lack
of balance.
On the issue of unfair settlements, Insurance Ireland noted the small size of the sample,
and the acknowledgement in the accompanying notes that issues such as the reference
to potentially unfair settlements only related to a very small number of the already small
sample size.
Insurance Ireland. Accessed at: http://www.insuranceireland.eu/news-publications-and-events/news-pressrelease/insurance-ireland-advises-that-central-bank-report-relating-to-household-property-claims-does-notaccurately-reflect-the-market

44
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5. RURAL DWELLERS DIFFICULTIES WITH FLOODING AND

INSURANCE
On 12 February 2013, the Committee heard evidence from the Irish Farmers Association.
Mr. Michael Silke, chairman of the IFA floods project team; Mr. Joe Parlon, IFA Offaly
county chairman; Mr. Andrew McHugh, IFA Longford County Chairman; and Mr. Gerry
Gunning, IFA rural development executive.
5.1 FARMERS EXCLUDED FROM FLOOD COVER DUE TO INCIDENCE OF

SUMMER FLOODS
Representatives of farming organisations gave evidence to the Committee on 12
February 2013 of their particular problems with insurance or lack of it due to the
incidence of summer flooding of the Shannon catchment area. 45 Mr. Michael Silke of the
Irish Farmers Association (IFA) briefed the Committee that their big issue with insurance
is that farmers have never seen it as feasible to insure their land against flooding. They
do not think it is even possible. If farmers are insured and get the insurance the first
time round, most are unable to afford the insurance the second time even if they can get
it. He requested that the authorities should not dwell on the insurance issue but on the
feasibility of implementing measures that would reduce the possibility of floods in the
future.
45http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/committeetakes/ENJ2013021
200003?opendocument#D01400
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5.2 SUMMER FLOODING IN THE SHANNON CATCHMENT AREA

Mr. Silke outlined to the Committee that in early June 2012, the most serious summer
flooding ever witnessed in the Shannon catchment area had a devastating effect on
farming. Thousands of hectares of grasslands and meadow for grazing stock and
harvesting for winter fodder was destroyed. Farmers who lose land lose the ability to
feed cattle for that year; they were forced to house their stock in early summer at huge
financial cost and faced financial ruin.
This followed a big flood in 2009, when farmers had lost a great deal. They again had
lost their ability to feed cattle (in 2012) and used bought feed. Farmers were said to be
very dissatisfied with the lack of response from official Ireland. According to Mr. Silke,
politicians are putting their faith in Shannon CFRAMS, the Catchment Flood Risk
Management and Assessment Study, which will not be finalised until 2015. Even at that
stage there will still be only a proposal, a study, a survey. In the interim, farmers have a
major problem.
While all the agencies have a role, including the OPW, the ESB, Waterways Ireland, the
National Parks and Wildlife Service (NPWS), Inland Fisheries Ireland and Bord na Mna
to some extent as well as local authorities, in the view of the IFA the OPW should
oversee other agencies. Mr. Silke called for the lead agency (the OPW) to dictate what
works would be put in place to alleviate flooding.
5.2.1 LAKE WATER LEVELS

A grievance submitted to the Committee by Mr. Silke is that Waterways Ireland, whose
remit is for navigation and recreational purposes, allegedly allowed artificially high levels
to be maintained in the lakes. Waterways Ireland has made known to farmers that it is
working with the Electricity Supply Board (ESB) to maintain the river and the lakes at a
certain level and the farmers find this totally unacceptable. He suggested that this was a
massive contribution to serious summer flooding in recent years.
The farmers view is that the aim should be to reduce the water levels to the lowest level
compatible with navigation purposes so that the river is able to take additional water at
critical times such as when there is excessively heavy rainfall.
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In the case of the ESB, it is apparent to farmers that the holding back of water at critical
times has contributed to serious summer flooding. They believe that water levels in
Lough Ree, Lough Allen and Lough Derg are maintained at an artificially high level.
Farmers want to know why the water levels in Lough Ree were tampered with in the
1970s and have risen by 0.6 m, which is exactly two feet. These levels were given
statutory effect in the ESB regulations for the Shannon in 1979. Mr. Silke called on
Members of the Committee to address this issue.
He advocated that the agencies make greater allowance for rain and bring the levels
back to what they used to be. If there are problems in Lough Ree with the jetties that
were built in the intervening years, farmers suggested a deal be done between the
National Parks and Wildlife Service to make provision for proper access to those jetties.
Mr. Silke submitted that the National Parks and Wildlife Service should not destroy
farmers livelihoods because it wants to get boats into a particular spot along Lough Ree.
Deputies Stanley and Coffey, in particular, echoed the concerns that the OPW does not
have the final say over what happens in many water courses because other bodies, such
as the National Parks and Wildlife Service, are responsible for them. To them it seems
problematic that the NPWS can exercise a veto on whether, for example, a sluice gate
should remain open.
Mr. Silke claimed that there was an opportunity during the dry period to allow water
down through the system, but no capacity now, and that this was the reason for summer
flooding. Two feet of capacity could have been gained. The year 2012 was said to be a
prime example when there was a dry period in March and April. If water had been
released at that time, it would have created a huge capacity for when the rain came. A
small amount of rain in the summer will flood the system. The IFA had consulted Jacobs,
the consultants involved in CFRAM, and were disappointed with their presentation as it
did not address the issue of the levels in Lough Ree. Neither had they dealt with the
feasibility of using cutaway bogs north of Lough Ree.
An ESB witness who had given evidence to the previous Committee (on 23 February
2010), (Mr. Tom Browne, engineering and technical risk manager, ESB) had proffered an
answer to the question about changes in the 1970s in a press report:
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A tide of anger still flows over Shannon floods, Farming Independent, 3

September 2013.
There is a local view that the ESB stores water in Lough Allen and Lough Ree as a
generation reserve, and that this means that flash flooding is forced across the flood
plain. Not so, says Tom Browne of the ESB.
Tom describes this assertion as "misinformation", which he says is tied into the history of
the problem.
Ardnacrusha was built in the 1920s and was then the largest generating station. Until
the advent of larger stations and the construction of Turlough Hill pumped storage
station in the 1970s, there would have sometimes been excessive draw-off of water to
maintain generation, particularly in the war years when Ardnacrusha was often the only
station operating. The focus changed in the early 1970s to one of managing the river to
meet the needs of all stakeholders.
Tom Browne points out that ESB has no interest in Lough Allen and Lough Ree for
generation, but the company has an obligation to manage levels in the lakes to ensure
dam safety, to provide adequate water supply for fisheries and public bodies, and to
minimise flooding. Athlone weir is 123 feet above the ordnance datum at Poolbeg. The
1934 Electricity Supply Act allowed ESB to draw water down to 121 feet to facilitate
continuity of electricity supply in drier months.
In the early 1970s, levels were gradually restored to the 123 foot level to facilitate boat
traffic, and in 1979 the company agreed formally with the OPW to maintain 123 feet as a
summer minimum. This restoration of the level to what it was in the years before
Ardnacrusha was built is often quoted as the reason for summer flooding, although there
is no suggestion that summer flooding was an issue when the Shannon was a
commercial waterway with related higher levels in Lough Ree.
ESB nowadays allows the flooding level at Athlone to drop by 300mm in mid- August and
by a further 300mm in mid- October as part of its flood management role, and also
collects and maintains records of rainfall, water levels and flow data on the river. The
83 | P a g e
company has no responsibility to supply flood warnings, but does issue twice-weekly
lake-level forecasts to all relevant stakeholders.
Most observers agree that the problem centres on the river channel between Athlone
and Lough Derg. The river here lacks gradient and flood waters simply spread across the
flood plain when the levels rise. However, there is also widespread belief that not enough
is being done to maintain this channel, and that authorities are slow to respond when
flooding is imminent.
At a subsequent meeting of the Committee on 23 April 2013, Mr. Tony Smyth, director
of engineering services in the OPW, responded to the point raised above by Mr. Silke:
We also have frequent meetings with Waterways Ireland and the ESB. The
Board has agreed to aim to reduce the starting water levels in Lough Ree by
100 mm at the start of the summer and to have that as its target but that will
be dependent on hydraulic conditions, rainfall, what happens on the river and
so on. We are not always in control of that because there is a limited level of
control. There are only a number of gates in Athlone that can be opened and,
therefore, at a certain point the inputs into Lough Ree overwhelm the output
and one is not in control of the level but we understand the difficulties and our
response in a sense is through the CFRAM for that, as it is for other rivers
around the country to develop proper warning
Regarding Lough Ree ... the ESB does not have complete control of water
levels. It can open a number of gates to reduce water levels somewhat, but
more enters the lake at certain times than can be released through the gates or
over the weir, leading to a rise in water levels that overwhelms the ESB's
efforts.
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5.2.2 FLOOD WARNINGS

According to Mr. Silke, the ESB had a short time previously contacted the stakeholders
to say there was a chance of flooding in the next 24 hours, but he said that that was too
late. In June 2012, they were given seven days warning of a huge rainfall but Mr. Silke
maintained that nothing was done in that seven days.
On 26 February 2013, Mr. James Doyle of the Irish Rural Dwellers Association also
commented on flood warnings. He told the Committee that by the nature of the events,
and the extreme weather conditions, there is often very little warning. He said that, in
fairness to the local authorities and the other agencies, drains were blocked and that
events had happened very quickly. He stated that the response is reasonably good but
that any process can be improved.
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5.2.3 ESSENTIAL MAINTENANCE WORK ON THE SHANNON

Mr. Silke asserted that essential maintenance work has not taken place despite the fact
that various reports over decades indicated that remedial works in key areas along the
River Shannon would have a massive beneficial effect for farmers, the community and
the protection of threatened wildlife. In this connection, he claimed that the EU Habitats
Directive (Council Directive 92/43/EEC on the Conservation of natural habitats and of
wild fauna and flora) is a rough tool. He described tiny islands which have accumulated
on the River Shannon and are on no map. In the IFAs view, it is critical for the OPW,
which has its own environmental scientists, to address this issue with the NPWS and to
tell them that the public good is at risk and that people's livelihoods and human health
are at stake.
According to Mr. Silke, the core issue is not insurance, but the failure of the State to put
in place a proper maintenance programme, to remove the impediments in the Shannon
and to return to the pre-1970s water levels. The levels should not have been tampered
with. As they were, there should have been an alternative strategy to take away the
water that is coming north of Athlone into bogland over a critical period and release it at
a more appropriate time.
Mr. Silke pointed out that:
after the flooding of 1954, the 1956 Rydell report 46 proposed a summer relief
scheme;
in 1961, the ESB and OPW issued a report47 which proposed much the same;
the Delap and Waller report in 198848;
the report of an Oireachtas committee in 200049;
River Shannon Flood Problem, Final Report, L E Rydell, Corps of Engineers, U.S. Army, August 1956.
Accessed at: http://opac.oireachtas.ie/AWData/Library3/Library2/DL010459.pdf
47 River Shannon Flood Problem. Report on First Stage of Investigations, prepared jointly by Office of
Public Works and Electricity Supply Board. (1961)
http://opac.oireachtas.ie/AWData/Library3/Library2/DL011778.pdf
46
Report on the Technical Aspects of the River Shannon Flooding Problem for Irish Farmers Association,
Delap and Waller, May 1988.
48
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and last year's report50;
all proposed something in the line of a summer relief scheme to deal with summer
flooding.
Mr. Browne was echoing one of the key findings of the Rydell Report:
The problem of Shannon River Flooding has been the subject of much study
over the past 150 years. Because of the flat terrain through which the river
flows, the almost imperceptible gradient of the stream within its series of lakes
and connecting channels and because of the large volume of long duration of
flooding, no simple or obvious solution has therefore been found nor has the
writer now found one.
49 Interim Report on Flooding on the River Shannon,
House of the Oireachtas, Joint Committee on Public Enterprise

and Transport Sub-Committee on the River Shannon Catchment, November 2000. Accessed at:
http://opac.oireachtas.ie/Data/Library3/Library2/DL026170.pdf
50 http://www.oireachtas.ie/parliament/media/Report.pdf
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5.3 OPW RESPONSE TO EVIDENCE GIVEN TO THE COMMITTEE ON THE

RIVER SHANNON
Mr. Tony Smyth, at a subsequent meeting on 23 April 2013, responded to the above
points:
A range of policy issues affect management powers on the Shannon. Many
agencies and local authorities have a remit over planning, tourism, boating
and so forth. When the OPW identifies a scheme of works, they generally
put the plans on public exhibition, giving others an opportunity to comment.
The OPW has powers to implement a scheme. Once it is shown to be
technically sound, passes its cost benefit analysis and meets environmental
criteria, they recommend it for construction
In some cases, a scheme will be led by the OPW and in others it will be led
by a local authority. That is the process from plan to outline design stage.
Mr. Smyth referred to OPWs response to the Committee's 2012 report on the River
Shannon.
He referred to the protocol in place between the ESB and Waterways Ireland for the
operation. The protocol is based on water levels rather than on forecasts of rainfall, and
they respond in a particular way to that. However, that is within the remit of the ESB
and Waterways Ireland, and until the OPW has other evidence to say that it should be
done differently, they are not in a position to make other suggestions.
Mr. Smyth said that his understanding from stakeholders such as the IFA and others was
that this is not acceptable to them. But, pending the outputs from CFRAM when the OPW
will have a proper model of the river and a proper understanding of the water levels and
how the water levels in the lake and the callows are interconnected, the OPW will not be
in a position to make any recommendations for changes on those levels.
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5.4. SHANNON MAINTENANCE: SILT AND TREES

Mr. Silke alleged that as a result of Bord na Mnas operations along the Shannon,
thousands if not millions of tons of peat in critical areas of the river washed down the
river and was caught at corners and various places. The IFA have identified to the OPW
the critical places in which silt has accumulated and bushes and trees are growing. They
want these bushes and trees taken from the river.
Deputy Coffey, at the hearing of 26 February 2013, said that the Committee should
ascertain if exemptions can be sought for emergency works for reinforcement of river
banks or removal of silt in rivers where there is extreme pressure. He had seen
farmlands flooded where the water got out on to regional roads and caused a serious
traffic hazard. In the locality of which he spoke, flood defence and mitigation measures
have been put in place. A huge investment has been made by the Government in
Clonmel, Carrick-on-Suir and Waterford city to defend against flooding. He declared that
there is a need for serious engagement with the OPW and the National Parks and Wildlife
Service on silt removal and reinforcement of river banks to make it easier for landowners
and farmers to do the work in an emergency fashion.
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5.4.1 OPW RESPONSE ON SHANNON SILT AND TREES

At a subsequent meeting of the Committee on 23 April 2013, Mr. Tony Smyth, director
of engineering services in the OPW, responded to the points on the removal of silt and
trees. He pointed out that the NPWS (National Parks and Wildlife Service) enforces the
EU Habitats Directive and the resultant legislation, which regulates issues concerning the
environmental impact of removing the silt, such as the disturbance of various plants,
flora and fauna. An element of the OPW major Flood Relief programmes is a full
environmental impact assessment. Environmental consultants are engaged at the same
time as the engineering consultants in order to examine the possible environmental
constraints on the various flood mitigation options and as far as possible build those into
the design. Mr. Smyth said he is not aware of any significant delays on major works.
He said that he was aware that on minor works, certainly in the Shannon area, it has
caused delays because there was no economic way to do what local stakeholders had
requested, which was to move silt and distribute it on the land. There were concerns
about damage to the environment and Mr. Smyth said they were unable to proceed with
some of those minor works. That tends to be more of a problem with minor works rather
than with the major ones where the OPW has the resources to do all the various
environmental studies and influence the design of schemes in that way.
Mr. Smyth acknowledged that silt remains an issue. Without a scheme that is cost
beneficial and can resolve all the elements, he stated that it is difficult to invoke powers
to undertake these tasks. He said that the OPW has not engaged with Bord na Mna in
regard to transporting the silt on the network. He emphasised that at present the OPW
has powers for maintenance on completed schemes under the Arterial Drainage Acts. To
invoke these powers they need to carry out a scheme under the Act, which involves
putting it on public exhibition after proper engineering, design, cost benefit and
environmental assessments, having it confirmed by the Minister and then constructed.
After this, the OPW maintains the scheme. He pointed out that the OPW does not have
the legislative power to do the kind of work in question, namely, take silt or branches
out of the river.
Questioned by Deputy Corcoran Kennedy as to whether the OPW would be happy to
have such powers, Mr. Smyth replied that this would be difficult, as there is other
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constricting legislation. One cannot just remove silt. The OPW must comply with the
body of environmental legislation put in place by the Oireachtas and the EU. Being given
powers over one aspect means that the OPW must comply with other legislation. A
process would then need to be put in place to comply with the various constraints, for
example, public expenditure, environmental law and procurement law.
The Vice Chairman questioned Mr. Smyth on the maximum spend for small local
authority schemes. Mr. Smyth responded that the limit was set by the OPW at 500,000
because they believe engineering works costing more than that would certainly have
environmental impact and should have proper environmental and cost-benefit studies
carried out. The benefit of the minor works is that the OPW has developed simplified
criteria for the cost-benefit analysis to ensure they are getting benefit for the cost but
without having to go to the rigours and expense of a full cost-benefit analysis as they do
for the major schemes. Completing a full cost-benefit analysis might run to anything
between 10,000 and 30,000. In cases where the works will cost 50,000, it does not
make sense to spend that kind of money on studies.
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5.5 RIVER SHANNON: SOLUTION PROPOSED

Mr. Silke (IFA) urged that the Minister of State with responsibility for OPW must
implement a strategy, to include:
An early warning system for extreme weather patterns;
A policy of allowing water to move on when heavy rainfall is forecast and

occurs;
Essential maintenance work to be carried out.
He urged that all of these measures be given legislative effect.

Deputy Stanley noted that the Committee had passed a motion that its 2012 report on
this matter 51 be referred to the Dil where it would be discussed with the Minister of
State, Deputy Brian Hayes, present. The report includes eight recommendations and he
believed the witnesses would agree with most of them.
51
Joint Committee on Environment, Culture and Gaeltacht. Eight proposals urgently required to tackle flooding on
the River Shannon, its tributaries and the waters feeding into it (July 2012).
Accessed at: http://www.oireachtas.ie/parliament/media/Report.pdf
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5.6 PROVISIONS FOR FARMERS AFFECTED BY DISRUPTIVE WEATHER

EVENTS: CASE OF ARGENTINA
As the OPW witness indicated that EU and Irish legislation constrains some of the
solutions proposed by farmers, it may be instructive to look at other models of
compensating farmers for weather- related losses. Argentina is one country in which
different solutions have been implemented for the agriculture sector.
Text Box 2: The importance of understanding disaster risk exposures and riskbearing capacities within the economy the case of Argentina and the
agriculture sector
Argentina is a country where the agricultural sector plays an important role in the
economy. This economic dependence on farming makes the country vulnerable to
weather-related hazards and climate change impacts on weather patterns. Of particular
concern to Argentina are the potential economic impacts of adverse weather events on
small and medium producers, who may not have the financial capacity to manage
agricultural risks linked to weather patterns, particularly climate change.
Argentina has, at various levels of government, developed a range of financial
instruments intended to offset the costs of disruptive weather events, such as grant
subsidies for insurance as an instrument of social policy in rural areas (e.g., avoiding
rural-urban migration, reducing producer vulnerabilities through financial protection of
assets), tax exemptions for agricultural insurance, and reinsurance, although there are
currently no national subsidy programs. A National Committee on Farming Emergencies
and Disasters has been created whose main purpose is to manage the compensation of
farmers affected by climate, weather, seismic, volcanic or biological events.
Source: Improving the Assessment of Disaster Risks to Strengthen Financial Resilience,
Special Joint G20 Publication by the Government of Mexico and the World Bank (2012),
quoted in OECD report, op.cit.
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6. STATE AUTHORITIES ROLE IN FLOOD REMEDIATION

6.1 LOCAL AUTHORITY FLOOD REMEDIATION WORKS
Representatives from Kildare County Council outlined to the Committee on 26 March
2013 the local authority system of flood risk management. They were Mr. Michael
Malone, County Manager, Mr. Alan Dunney, senior executive engineer, and Mr. Joe
Boland, director of services for water services and the environment.
Mr. Dunney declared that there have been six fairly major flood events in County Kildare
since 1993. These floods took place in June 1993, November 2000, 9 August 2008, 16
August 2008, 27 November 2009 - a very big one - and 1 January 2010. After the flood
events of 1993 and 2000, Kildare County Council commissioned a number of reports for
areas that have been at risk of flooding. Work was done on this before 2008, particularly
along the Morrell River, as well as in Leixlip. In August 2008, the county council set up a
dedicated flood alleviation section, headed by Mr. Dunney.
As part of their work with the OPW, they undertake two types of scheme, the capital
programme and the minor works programme. The capital programme is for works in
excess of 500,000 and, to date, they have undertaken two fairly big schemes.
Regarding insurance, the County Council have found in recent years that once an area
has flooded, residents find it difficult to get property insurance. Despite the Council
having delivered a scheme, they would receive a call from the public to say that
insurance is still not available in that area.
In response, they drafted a standard letter for these land owners describing the work
done, detailing design standards and outlining how the risk of future flooding has been
reduced. The letter template states that they can confirm that flood alleviation works
have been completed, and states the design standard for the work is the 1% annual
exceedance probability with a further allowance of 20% for climate change. It confirms
that the Council considers the successful completion of the flood alleviation works should
reduce the risk of flooding in a particular estate. The letter states that Kildare County
Council does not accept any liability in respect of the letter.
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6.2 LENGTH OF TIME TAKEN TO IMPLEMENT FLOOD REMEDIATION WORKS:

LOCAL AUTHORITIES
Deputy Murphy alluded to the criticisms (above) heard by the Committee that it takes a
long time to have Flood Remediation remedies put in place. She queried whether there
are logjams in the process, especially in the interaction between local authorities and the
Office of Public Works? Could the Joint Committee make recommendations in this
regard?
Mr. Dunney in reply gave the example of the Office of Public Works direct labour crews
building the works in Johnstown and Leixlip which probably took four years to complete
works, from the time representations were made to completion. They carried out a
preliminary design and cost-benefit analysis for a scheme, obtained approval from the
Office of Public Works to proceed with planning and detailed design and then secured
landowner agreements. It probably took two years to move on to the site and a further
18 to 24 months to carry out the construction programme. Construction is substantially
complete, with the exception of reinstatement which can be done when the weather
improves.
In response to a question on whether any Kildare County Council schemes have been
delayed, he answered that they had by and large obtained funding for all schemes that
they had proved to be cost-beneficial. The main issue is to show a scheme is cost
beneficial. Under the minor works programme, the cost to benefit ratio is 1:1.5, which
means that if the benefit of a scheme is estimated to be 15,000, it must cost less than
10,000 to fix the problem. Under the capital works programme, the cost-benefit
analysis is more complicated and involves discounting the scheme over its lifetime,
which is defined as 50 years. Once this is shown to be positive, the scheme will generally
be considered but will fall into an overall national programme. It joins the queue, as it
were.
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6.2.1 HABITATS DIRECTIVE CONSTRAINTS

Three rivers run through Kildare - the [Enfield] Blackwater / Boyne, the Barrow, and the
Liffey - and the local authority is constrained by legislation in the management of these
rivers.
As required under the EU Habitats Directive52, every three years the Barrow Drainage
Board engages an environmental consultant to prepare a Natura 53 impact statement.
That identifies areas along the river where certain species live and the mitigation works
the local authority must carry out to clean the river where the species are located. There
are windows within the calendar during which they can work. For example, if they cut
trees along the Barrow, they must finish by the end of February. If they want to put a
bucket into the river, they can only do so between May and September, and with the
agreement of Inland Fisheries Ireland. Some rivers are much more sensitive than others.
6.2.2 LOCAL AUTHORITIES AND CFRAM

In response to questions from Members who raised the issue of the impact of future
planning, Mr. Dunney answered that the County Council must await the completion of
the two CFRAM (Catchment Flood Risk Assessment and Management), studies under way
in Kildare because they will be the recognised model and standard for the issue of
flooding and the identification of potentially risky locations.
The OPW had published a set of maps under the CFRAM programme, perhaps 12 months
before (in March 2012), which offered an overview of where flooding might happen. As
part of the CFRAM programme there was public consultation, and results were sent out
under the preliminary flood risk assessment. Since then, surveyors and modellers have
been engaged to develop site-specific flood mapping for different areas. For example, in
the Liffey catchment of the eastern CFRAM scheme a number of areas were set aside for
further assessment. Each of those would have detailed surveying and modelling done.
52
EU Habitats Directive
53
Natura 2000 network

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The CFRAM programme, in the County Council view, is a very positive development, as it
will give a standard overview of the various catchments. Mr. Dunney stated that in two
or three years there will be a national menu of works that will be recommended through
the CFRAM programme. If funding can be set aside for each individual scheme as they
go down the list, it could be like the next roads programme.
The OPW is the lead agency in the CFRAM programme; each local authority in an area
would be represented on the steering group for that particular CFRAM study. Kildare
County Council sits on the steering group for south east and east, covering the Barrow
and the Liffey and all their tributaries.
6.2.3. RIVER MANAGEMENT AND WATER LEVEL UPDATES

There is a drainage board for the Barrow, established under statute by the Barrow
Drainage Acts 1927 and 1933. The Blackwater is part of the Boyne drainage district
maintained by the OPW.
The Liffey is not part of any drainage district. The river is managed by the ESB, in terms
of the dams. The River Liffey has a specific legislative code, the Liffey Reservoir Act
1936, by virtue of the involvement of the ESB and the extraction of water for the
generation of electricity,
Kildare County Council receives weekly updates from ESB on the volumes of water it is
releasing through the dams and information on whether the levels of water in the
reservoirs are rising or dropping rapidly or slowly. If there is inclement weather the
Council might get daily or even more frequent updates.
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6.2.4. PUBLIC PROCUREMENT PROCESS

Mr. Malone referred to the tendering process as a factor in the length of time taken to
carry out flood risk management works. He said that the procurement process for
drainage is the same as for any other works. The limits are set down and local
authorities have to work within them, with no way around those limits. He acknowledged
that eTendering and procurement can take a long time. However, as a general rule, the
size of the contract dictates whether local authorities have to go through an eTendering54
process and he does not think there is any way around that. There would not be a tender
involved if the OPW was doing the work directly, if the OPW had the capacity to do the
work. If a work programme was very large, the OPW would have to get outside
assistance.
Mr. Dunney told the Committee that depending on the value of the contract, the OPW
could get three prices, go through the eTendering process or even have to go through
the [Supplement to the] Official Journal of the European Union55.
Mr. Malone said that it is down to value and capacity within the OPW. The OPW has to
judge whether it can do the work itself and, if it can, that speeds progress. Many
decisions on schemes revolve around issues of scale, complexity and cost. Some
schemes can be very complex or costly and the more costly they are, the more difficult it
is to secure funding for them.
Kildare County Council has undertaken a range of schemes themselves, some minor and
some major. When they set up the dedicated team within Kildare County Council they
were in a position to draw up schemes and ensure that any cost-benefit analysis would
support them. That went a long way towards enabling them to make their case to the
OPW. When plans are being prepared, all the boxes must be ticked in order to secure
funding.
54
eTenders http://etenders.gov.ie/ Office of Government Procurement
55
Supplement to the Official Journal of the European Union

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6.3 ROLE OF THE OPW (OFFICE OF PUBLIC WORKS) IN FLOOD REMEDIATION

Mr. Tony Smyth, director of engineering services, and Mr. Liam Basquille, principal
officer in engineering services in the OPW, gave evidence to the Committee on 23 April
2013.
The Vice Chairman asked the OPW witnesses to address the issues that have been raised
by previous witnesses and, primarily, by Insurance Ireland, whose submission stated:
It is important that the OPW communicates reliable information on flood
defences to insurers Insurers need to have confidence in OPWs review of
standards and commitment to maintenance of flood defences once
completed as well as access to comprehensive information on all areas
vulnerable to flooding showing the status of remedial works... details of the
design standards to which flood defences have been constructed, expressed
as the return period of an event which the defence is designed to withstand.
The minimum standard required is a return period of 1 in 100 years maps
in GIS [Geographic Information System] format for all vulnerable areas
showing likely flood extent maps showing the protections offered by any
remedial works; and regular updates of all information.
Mr. Smyth referred to the OPWs specific role in the transfer of information to the
insurance industry on flood risk and flood defences and emphasised that the OPW has no
responsibility for oversight or regulation of the insurance industry or insurance matters
generally. He updated the Committee on the newly-inaugurated co-operation between
the OPW and Insurance Ireland (see Section 3.16 of this paper).
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6.3.1 ROLE AND RESPONSIBILITIES OF THE OPW IN RELATION TO FLOOD RISK

MANAGEMENT
Mr. Smyth noted that following a Strategic Review of Flood Risk policy in 2004 56, the
Office of Public Works was assigned the lead co-ordinating role for flood risk
management in Ireland. They deliver services in the following key areas:
Strategic planning to manage flood risk under the Catchment Flood Risk
Assessment and Management, CFRAM, programme in compliance with the EU
Floods Directive;
Under the coastal protection strategic studies, capital investment to address

existing flood risks to properties and infrastructure through major and minor
Flood Relief projects, in partnership with local authorities; and
Maintenance of those arterial drainage and urban Flood Relief schemes completed
under the Arterial Drainage Acts.
They engage in important information gathering, including in particular collection of

hydrometric data to improve the estimation of water level flow and to enhance the
quality and reliability of Flood Relief design and mitigation measures. They also
developed awareness programmes among the public and businesses of the risks of
flooding and provided information on how to plan, prepare and protect against flood risk.
They commission research into areas related to flood risk management activities.
The core of OPW's work is the objective of reducing the flood risk to the greatest extent
possible. While the OPW and the local authorities work in partnership, Mr. Smyth
explained that the local authorities are responsible for distinct work areas in relation to
flood risk, such as leading the emergency response to flooding, the urban drainage
infrastructure and the maintenance of certain watercourses and channels.
The OPW continues to fulfil its statutory responsibility to maintain in proper repair and
effective condition arterial drainage schemes and flood defence schemes which it has
carried out under the Arterial Drainage Acts 1945-1995. This maintenance work is
Report of the Flood Policy Review Group, OPW, September 2004, accessed at:
http://www.cfram.ie/pdfs-downloads/Flood_Policy_Review_Group.pdf
56
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carried out to ensure that the States investment in these schemes continues to provide
the intended benefits. Drainage districts are areas where drainage schemes to improve
land for agricultural purposes were constructed prior to the 1945 Act. The duty of
maintenance for these lies with the local authorities concerned. For other watercourses
falling outside of the OPW and local authority areas of responsibility, private landowners
generally have responsibility for maintenance. 57
57
Letter from the OPW to the Clerk of the Committee, 25 September 2015.
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6.3.2 OPW EXPENDITURE ON FLOOD RELIEF WORKS

OPW EXPENDITURE ON FLOOD RELIEF WORKS IN 2011
Deputy Stanley drew the attention of the Committee to a parliamentary question he had
asked in December 201258 because of the possibility that there may be unspent money
for Flood Relief works. At that stage, 7.7 million or 7.9 million for Flood Relief works
was unspent by the OPW.
OPW MAJOR CAPITAL WORKS IN 2013

Mr. Smyth noted that under its major capital works programme, the OPW currently has
nine major Flood Relief schemes at construction stage. It was expected that a further
five schemes would commence construction before the end of 2013, subject to
completion of procurement and other preparatory formalities and the availability of
funding. These five schemes are Bandon, Ennis, Claregalway, a further phase at the
Dodder and, possibly, Templemore.
In response to Committee members concerns about major delays in the Templemore
scheme he outlined the unanticipated complex elements of the detailed design, including
issues with land ownership, purchase of land and site and moving of petrol tanks. The
OPW are considering a slightly different route, which has other ramifications, including
issues of cost. Mr. Smyth could give a date to resolve the issues, as some of these, such
as purchase of site, are not within the control of the OPW. With hindsight, he said that
the OPW was premature in going to exhibition.
A further 26 schemes are at various stages of design and planning. Approximately 30
million was expected by Mr. Smyth to be expended on all these schemes during 2013.
Available at:
http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/takes/dail2012120500066?ope
ndocument&highlight=Stanley%20and%20flood%20relief#WRB02150WrittenAnswers.
58
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OPW MINOR CAPITAL WORKS AND COASTAL PROTECTION IN 2013

Under the minor works and coastal protection scheme, OPW provides funding to local
authorities for smaller scale, more localised mitigation measures they wish to undertake
in their areas. It is open to any local authority to submit an application to OPW for
funding under this scheme. Under the arterial drainage maintenance programme, the
OPW continued in 2013 to undertake maintenance of completed arterial drainage and
Flood Relief measures.
Mr. Smyth informed the Committee that the previous [2012] years outturn was 7.5
million more than the allocation. The allocation was 45 million and the OPW had spent
52 million. The OPW found savings in other categories.
6.4 WHETHER OPW SHOULD HAVE THE FINAL SAY OVER OTHER AGENCIES?
Deputy Stanley questioned Mr. Smyth as to whether the OPW would be happy to have
the final say, that is, to give direction to other agencies involved in the management of
flood risk.
Mr. Smyth said that the Deputy was getting into a range of policy and legal issues about
which Mr. Smyth would not be comfortable in speaking. He stressed that he does not
believe anybody can overrule the OPW and he does not know that it is appropriate to
have a flood-risk management agency having a greater say in some of those other
issues. There is environmental legislation with which the OPW has to comply. The ESB
has a legal remit regarding the water levels on the Shannon at present. The OPW does
not have any evidence and have not completed proper models of the river - and will not
have until the CFRAM is completed - to make other arguments. Until that point is
reached Mr. Smyth contended they are weak on grounds of any logic, evidence or
argument they might make.
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7. EU COUNTRIES PRACTICES ON FLOOD RISK INSURANCE

It was stated during hearings that Committee members need a range of measures that
they can bring to the Minister for the Environment, Community and Local Government or
the Minister of State at the Department of Finance, with responsibility for the OPW.
Deputy Murphy remarked that it would be useful to hear specific ideas on the kinds of
protocols that might work or on systems in other countries that might work here. She
said that they would do some research themselves but specific examples of what the
witnesses would like the Committee to do would be very helpful.
7.1 EU: DIFFERENT SYSTEMS OF INSURING AGAINST FLOOD RISK

Insurance Ireland witnesses, Mr. Kemp and Mr. Horan, stated59 that they do not have
detailed information on how the relationship is managed in other countries but that
systems work very differently in countries on the Continent, where there is limited
penetration of private insurance and collective or State-backed funds are used to insure
against flood risk.
As Ireland has been placed by the EU in Cluster 1 (see Figure 1, p.18) with Belgium,
France, Sweden and the UK, whose model of insurance provision is similar, these
countries practices regarding flood insurance will be compared with the practice in
Ireland.
59
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7.2 UK: AGREEMENT BETWEEN GOVERNMENT AND INSURANCE INDUSTRY

In response to flooding developments, a Statement of Principles agreement was initiated
between the UK government and the ABI (Association of British Insurers) in 2008. This
agreement aimed to keep insurance costs down for those households in flood risk areas.
The ABI agreed to offer such households affordable home insurance in return for the
government to develop new and reinforce existing flood defences.
The agreement was due to end in June 2013. This was extended to July 2013 on the
introduction of a new scheme, Flood Re, to cover losses of householders who can no
longer afford insurance cover. Under the new arrangements, a new nonprofit making
insurance fund, known as Flood Re, will be established to provide insurance cover to
500,000 households in the worst affected parts of the UK.
Under Flood Re, every household in the country will pay a small levy on their insurance
premium to fund a pooled subsidy for those most at risk of flooding, to ensure they can
still obtain affordable home insurance. Flood Re will be funded by a levy of 10.50 on
annual household premiums across the country, resulting in an estimated income of
180 million a year, which would then be used to pay for repairs. The government and
the insurance industry have said this cost will simply "formalise the existing cross
subsidy" between low risk and high risk households "and can be introduced without
impacting bills in general".
FLOOD RE
In June 2013 the ABI and the UK Government agreed a Memorandum of Understanding
on how to develop a not-for-profit scheme - Flood Re - that would ensure flood insurance
remains widely affordable and available. The framework is an agreement in principle but
not binding. Its unique elements are:
Flood Re will be run and financed by insurers as a not-for-profit fund which will
cover the cost of flood claims from high risk homes;
Insurers will pass the flood risk premium element from those households deemed
to be at high risk of flooding to the fund. Premiums for the flood risk will be
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calculated based on council tax banding (value of the property) up to a maximum

limit depending on the band;
Flood Re would charge member firms an annual charge of 180 million. This will
be funded by a levy of 10.50 on annual household premiums and equates to the
estimated level of cross-subsidy that already exists between lower and higher
flood risk premiums;
Flood Re will be designed to fully deal with at least 99.5% of years. Even in the
worst half a per cent of years, Flood Re will cover losses up to those expected in a
1 in 200 year a year six times worse than 2007 in the UK with Government
taking responsibility to work with the industry and Flood Re to distribute any
available resources to Flood Re policyholders should claims exceed that level.
According to the UKs Guardian newspaper:

all UK household insurers will have to pay 10.50 each into a fund that can
be used to pay claims for people in high-risk homes. But the insurance industry
said this already happened informally now, so general premiums should not
rise. The scheme will operate for 20-25 years, after which home owners will be
expected to protect themselves.60
As Belgium and France are in the Cluster 1 insurance model (see Figure 1, p.18) along
with Ireland, it may be of interest to compare these undertakings.
Flood insurance deal sees fears recede over future cover. The Guardian, 27 June 2013. Accessed at:
http://www.theguardian.com/money/2013/jun/27/flood-insurance-deal-industry-government
60
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7.3 BELGIUM: CAISSE NATIONALE DES CALAMITS / NATIONAL DISASTER

FUND 61
In Belgium, claimants can get repairs for disasters from the Caisse Nationale des
Calamits. Disasters that occur most often are natural disasters (floods, earthquakes,
discharge or overflow of public sewers, landslides and subsidence of soil). Given the
nature of the damage, compensation is rarely granted.
The National Disaster Fund makes payments on the instructions of the Federal Public
Services, FPS Economy, SMEs, Self-employed and Energy - Directorate General
Economic Potential (for agricultural disasters) and the FPS Interior Service Branch
Calamities (in case of public calamity). FPS Economy, SMEs, Middle Classes and Energy,
commonly known as the FPS Economy, is a Federal Public Service of Belgium, as is FPS
Interior.
Insurance companies compensate most common victims, and the National Disaster Fund
intervenes in very limited circumstances. This is particularly the case if goods are not
insured because of claimants financial situation (being entitled to a living wage or
equivalent financial assistance); if some of claimants assets are not covered by
insurance (crops that have not been harvested, livestock living outside the building,
land, crops, plantations); if goods do not constitute a single risk (among other property
exceeding a specified sum insured); in case of damage to public property
The Disaster Fund has no jurisdiction over the cases of damage. It only makes payments
on the order of SPF Interior (Federal Public Service) Service Branch calamities. Prior
recognition of the disaster as a public calamity is required. To compensate the victims of
a natural disaster, it is necessary that it be recognized as a 'public calamity' by the
Council of Ministers. The introduction of a claim can only start after the publication in the
Belgian Official Journal of the order of recognition. Only after that can claimants apply
for compensation from the Governor of their province.
61
Belgian Federal Government. Assessed at: http://caissecalamites.be/fr/Claims.htm.
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7.4 FRANCE: CAISSE CENTRALE DE RASSURANCE (CCR) / CENTRAL

REINSURANCE FUND
This is a reinsurance company 100% owned by the French state. It is responsible for
designing, implementing and managing effective instruments to meet the coverage
needs of exceptional risks in the service of its customers and the public interest. 62 It is a
limited company with capital of 60 million, which employs 273 people. Founded in
1946, it ranks among the top 25 global reinsurers. Reinsurance activities with the
guarantee of the state are: reinsurance of risks of natural disasters; reinsurance RC ship
operators and nuclear facilities; reinsurance of outstanding risks associated with
transportation; reinsurance risk of attacks and acts of terrorism.
62
CCR. Accessed at: http://www.ccr.fr/index.do.
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7.5 IRELAND, BELGIUM, FRANCE, AND THE UK SITUATION PRE-2013

This section compares Ireland, Belgium, France, and also the situation pertaining in the
UK pre- 2013. The source of the information is the documents cited at the bottom of
each table, and information from insurance stakeholders.63
Table 8 Ireland, Belgium, France and the UK situation pre-2013
63
Comit Europen des Assurances (CEA), now renamed Insurance Europe is the European insurance and
reinsurance federation. Website: http://www.insuranceeurope.eu/
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IRELAND
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Belgium
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FRANCE
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UK pre-2013
Source: European Commission Natural Catastrophes: Risk relevance and Insurance

Coverage in the EU (op.cit).
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7.6 COUNTRIES IN WHICH GOVERNMENT PLAYS A ROLE IN DISASTER

INSURANCE
The OECD has examined the countries where the government has decided to supplement
the capacity of the insurance industry to cover disaster risks. 64 These include Belgium,
which has its Caisse Nationale des Calamits / National Disaster Fund, and France, which
has its Caisse Centrale de Rassurance (CCR) / Central Reinsurance Fund.
The OECD report65 outlined the various types of roles assumed by governments who are
involved in existing institutional arrangements for disaster insurance:
Backstop liquidity provider: The government provides liquidity, through a prearranged loan facility, to insurers to relieve funding pressures and enable them to make
payments on a potentially large number of claims linked to a catastrophic event. This
arrangement can take the form of liquidity facilities provided to an entity established to
reinsure disaster-related liabilities. Under this approach, insurance companies retain the
ultimate risk, but the government provides risk financing to address immediate shortterm liquidity needs or help to smooth catastrophe losses over time.
Reinsurer: The government or a special entity established by the government assumes
some or all of the liabilities assumed by insurers in connection with disaster risks, and
then possibly cedes some or all these risks to global reinsurance markets. This
arrangement is aimed at removing industry exposure to peak risks. It may be justified if
insurers can retain a portion of the risk, but there is not enough reinsurance capacity on
the private market to provide the required risk transfer arrangements. It may also be
part of a broader institutional arrangement in which there is mandatory offer, purchase,
or extension of disaster risk coverage, and thus may be aimed at protecting insurer
sector solvency.
Direct insurer: Alternatively, the government or a special entity established by the
government in some countries directly provides disaster insurance. Some or all of these
risks may be ceded to global reinsurance markets. This approach may be a response to a
situation where the private insurance sector is unwilling or unable to provide any
64
65
OECD, Op.cit.
Op.cit.
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coverage of disaster risks. While there is no risk sharing with the insurance industry,
private-sector operational capacity is often used to perform such functions as marketing,
premium collection and claims handling on behalf of the government.
Guarantor: Where institutional arrangements exist, governments often explicitly
guarantee some or all of the liabilities assumed in connection with disaster risks. Such a
guarantee might arise in connection with a special purpose entity, pool or fund created
to cover catastrophic risks to ensure that it will meet all its obligations. Thus, the role of
guarantor can be combined with other risk financing or risk transfer functions provided
by the government. The guarantee may be capped, with a threshold after which losses
may be recouped against, for instance, policyholders (e.g., special premium surcharge,
reduction in claims).
Examples of each type of role are listed in Table 9, below.
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TABLE 9 Roles of Government in Disaster Insurance Schemes

Backstop
Liquidity
United Kingdom (Pool Re)
Australia (Australian Reinsurance Pool Corporation or ARPC);
Belgium (Caisse nationale des calamites + participation in
Provider
Terrorism Reinsurance and Insurance Pool);

Reinsurer
Denmark (participation in Terrorism Insurance Pool for NonLife Insurance);
France (Caisse Centrale de Rassurance or CCR);
Japan (Japan Earthquake Reinsurance Co., Ltd. or JER);
Germany (participation in Extremus AG);
Netherlands (participation in Nederlandse

Herverzekeringsmaatschappij voor Terrorismeschaden or NHT).
Iceland (Iceland Catastrophe Insurance or ICI);
South Africa (SASRIA Limited);
Direct
Spain (Consorcio de compensacion de seguros);
Insurer
Turkey (Turkish Catastrophe Insurance Pool);
United States (California Earthquake Authority, National Flood

Insurance Program or NFIP).
Guarantor
Australia (Australian Reinsurance Pool Corporation or ARPC);
Denmark (storm surge - Danish Storm Council);
France (Caisse Centrale de Rassurance or CCR);
New Zealand (Earthquake Commission or EQC);
Spain (Consorcio de compensacion de seguros);
United States (National Flood Insurance Program or NFIP).
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8. SOLUTIONS PROPOSED BY WITNESSES AND COMMITTEE

MEMBERS
Having heard from witnesses who described the main categories of uninsured
populations (including those located in frequently flooded districts and farmers in the
Shannon river catchment), the Committee also considered possible solutions proposed
by them.
8.1 CO-OPERATION BETWEEN INSURANCE IRELAND AND THE OPW IN

DESIGNING FLOOD DEFENCES
As a result of the Committee hearings, Insurance Ireland and the OPW agreed to share
information about the technical design and mapping of the flood defences. The aim
avowed by Insurance Ireland is that once Insurance Ireland fully understand this, they
will try to incorporate it into their members' underwriting criteria. The new data
communicated by the OPW will enable them to amend their lists of at-risk areas to take
account of flood defences that have been built.
The hope is that buildings will then be removed from at-risk areas and policyholders
insurance cover will be restored or their premiums be reduced to affordable levels. If this
outcome does not materialise, however (as occurred in the UK scenario outlined above)
the Government may have to consider other measures.
8.2 GREATER STATE INVESTMENT IN FLOOD DEFENCES

The Insurance Federation of Ireland (now re-named Insurance Ireland) advocated an
improvement in current levels of state investment and implementation of flood defences
(see section 3.6.3 above).
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8.3 PROHIBITION OF BUILDING ON FLOOD RISK AREAS

Insurance Ireland emphasised the importance of taking flood risk into account when
zoning and planning. Their witnesses proposed that the Planning Guidelines on Flood
Risk Management 2009 be amended to prohibit building on flood plains, in a similar way
to the Scottish Planning Guidelines.
8.4 BETTER WARNING OF IMMINENT FLOODING

Both Insurance Ireland and the IFA advocated better flood warnings, although neither
suggested how this could be accomplished. In the UK, a Floodline is in operation with a
website and phone number which gives local and national flood warnings. This is
managed by their Environment Agency and available on their website. The Floodline
phone number is publicised on weather forecasts. Could a similar system be operated by
the Irish lead agency, the OPW?
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8.5 LEGISLATED PROTOCOL OBLIGING INSURERS TO GIVE COVER

Mr. ODonovan of the Irish National Flood Forum asked members of the Committee to
legislate for the insurance industry to abide by certain protocols, or by a certification
process, to enable households to avail of private home insurance which includes flood
cover. He suggested a basic protocol which he said would be transparent and helpful to
the insurance industry, the OPW and the public.
Mr. ODonovan stated that their requirement is 100% flood cover for a low-risk area,
which he defined as one which has a chance of flooding recurring once in every 150
years or more. If there is a moderate risk, say a chance of flooding recurring once in
every 75 to 150 years, then cover is decided on an individual basis. If there is a
significant risk of flooding, which he defined as a chance of flooding recurring more than
once in every 75 years, the Irish National Flood Forum can understand the insurance
industry's problems.
It should be noted that these risk areas do not correspond to the Zones of risk in the
Planning Guidelines on Flood Risk Management 2009, outlined above. Mr. ODonovan
thus acknowledged that certain properties may be still excluded from flood cover. Mr.
Dempsey told the Committee that the SVP believes this issue can only be addressed
through legislation and called on the Government to introduce it.
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8.6 FLOOD DISASTER FUND / LEVY

Insurance Ireland remarked that non-life policyholders are already paying levies of 5%
on their policies (Insurance Ireland, 19 December 2013).
Mr. ODonovan raised the question of how the current 5% Government levy on all nonlife insurance policies is spent. A new 2% levy on non-life insurance premiums was
introduced in 2012. The new levy was in addition to the existing 3% Government Levy
and Stamp duty.
The new levy was enacted under the Insurance (Amendment) Act
2011 with the intention that funds raised will be paid into the Insurance Compensation
Fund, which can be used to pay policyholders where an Irish-authorised or EUauthorised non-life insurer goes into liquidation.
It was reported66 that 65m. a year is generated by the 2% levy imposed on all non-life
insurance policies in the State in an emergency move intended to cope with the collapse
of the Quinn organisation. Mr. ODonovan stated that the Irish National Flood Forum is
asking for a proportion of this 5% Government levy be set aside for a Flood Disaster
Fund - similar to the proposal of Mr. Brendan Dempsey of the Society of Saint Vincent de
Paul - for flood victims who want to purchase flood insurance cover but are excluded
from doing so.
66
2% insurance levy to remain until 2037.. Irish Examiner, 12 August 2013.
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8.6.1 TRUST FUND / LEVY FOR THE BENEFIT OF UNINSURABLE HOUSEHOLDS (NTMA)
The Committee was provided with an outline of a pilot scheme which the INFF (Irish
National Flood Forum) hoped the Committee would support. The INFF witnesses said
that the INFF proposed the establishment of a Trust Fund for a flood event to help those
who do not have flood insurance cover, funded by a levy on the insurance industry of 2
on each insured home. Based on a figure of 1.8 million homes, this would generate a
sum of 3.6 million per annum. The Fund would provide a limited payment per home, to
a maximum of 5,000 per home. This would cover the cost of replacing a refrigerator,
washing machine, cooker, beds and clothes.
Mr. ODonovan referred to a sum of 10 million announced in 2009 for a catastrophe
fund for Flood Relief. As far as the INFF could ascertain, only 1.8 million of this funding
had been spent. He and Ms. Powell are seeking to have the remaining 8 million paid to
an agency such as the National Treasury Management Agency (NTMA) and ring-fenced
for this purpose. Mr. ODonovan was here referring to the Humanitarian Assistance
Scheme set up in 2009 by the Department of Social Protection.67
In response to flooding in 2009 the Government established a Humanitarian Assistance
Scheme. The scheme, which is means tested, is intended to provide emergency financial
assistance to households who are not in a position to meet costs for essential needs in
the period immediately following flooding. The aim of the scheme is to provide financial
support to people who have suffered damages to their home and provide hardship
alleviation rather than full compensation. The Scheme covers emergency income support
payments to those in need and damage to a persons home and its basic essential
contents, such as:
Carpets;
Flooring;
Furniture; and
Household appliances and bedding.
Government announces 10million fund to assist flooding victims:

http://www.welfare.ie/en/pressoffice/Pages/Government-announces-fund-to-assist-flooding-victims.aspx
67
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Structural damage may also be considered. Not covered under this Scheme are:
Commercial and business losses;
Losses covered by an insurance policy; and
Loss
or
damage
to
private
rented
accommodation
or
local
authority
accommodation.
INCOME TEST
The basic principle of the income test is to determine the households capacity to meet
the costs of restoring their home to a habitable condition. All household income will be
considered when determining entitlement to a payment.
The Irish Mail on Sunday reported on 31 March 2013 that approximately 2 million has
been paid out from this 10m Government Flood Relief fund.68
The Department of Social Protection, which administers the fund, has
granted 3,243 claims in all, at a total cost of 2,077,900. However, a
spokeswoman said the number of rejected applications could not be made
available.
In 2010, 1m was given to cover 2,100 claims (an average of 476 per
claimant), mainly in Galway and Roscommon following devastating floods the
year before.
Asked about the heavy flooding last June in Cork city and suburbs, the
spokeswoman said:
'Over 119 payments have being made to affected householders in the Cork
area to the value of 128,900, an average of 1,083.'
However, locals say most people affected by the high waters have not seen
even that small amount because the criteria are too restrictive for the average
homeowner.69
68
Flood funds unused: Only one fifth of 10m fund paid out in two years, leaving families high and dry - Irish Mail on
Sunday, 31 March 2013.
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The INFF suggested that sponsorship provided by non-governmental organisations could

increase the Fund. Members of the public would pay to join. The INFF propose a
membership fee of 10 per month in addition to what people pay for home insurance
policies that do not provide flood cover. They suggested that experts associated with the
insurance industry would help manage the fund. With an estimated 10,000 households
subscribing to the fund, the INFF envisages that they could pay out on events every year
without exhausting the fund. Based on a figure of 1.8 million homes, this would generate
a sum of 3.6 million per annum. This proposal has similar characteristics to the Flood
Re scheme agreed between the UK government and the Association of British insurers
(above).
69
Ibid.
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8.6.2 SOLIDARITY LEVY SCHEME

Although not a member of the Committee, Deputy Jim Daly attended a hearing due to
his concern about Clonakiltys four flood events in the previous 12 months and the
reasonable certainty that some areas will flood in any given year. He accepted that the
industry has no obligation where a liability is guaranteed to arise.
He informed the
Committee that he had put a proposal to the then Minister of State, Deputy Brian Hayes,
whom he had met along with officials from the OPW three weeks before. He had
requested an update on the Minister of States negotiations with Insurance Ireland. He
had learned that they are not going in the direction that he would prefer, i.e. where flood
defence schemes have been completed by the OPW, insurance companies would reinstate insurance.
Deputy Daly had recently put a proposal before the Dil that a solidarity levy should be
applied to all household insurance policy holders. 70 This would differ somewhat to the
NTMA scheme outlined above (8.6.1), as he believed his was stronger. He opined that
the NTMA scheme has a number of flaws, is complicated and difficult, short-term and
unsustainable in the long term. The 8 million of unspent money referred to by its
proposers is now probably reduced to a lower sum.
Deputy Daly advocated a scheme to provide insurance to people who cannot obtain it.
He had outlined a proposal to the Minister, who agreed to examine it and suggested that
the Deputy bring it to the Committee meeting and put it on the record. He proposed a
solidarity levy that would be paid by every household that has property insurance in
order to provide cover for those who have none. According to the IFF, 98% of
households have insurance; 2% do not. If a levy of 20 per annum per household was
applied, that would generate in the region of 32 million per year.
As to what could be achieved by an annual fund of 32 million the Deputy placed it in
the context of the flooding events in 2012, in which 627 affected households claimed
15 million. This was less than 50% of the amount he proposed be made available via a
Insurance coverage, 22 January 2013. Accessed at:

http://oireachtasdebates.oireachtas.ie/Debates%20Authoring/DebatesWebPack.nsf/takes/dail2013012
200035?opendocument&highlight=solidarity%20levy.
70
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20 levy. Would people pay that levy on their household insurance? He was using this
opportunity to determine what support this proposal might have. He proposed that the
scheme be modelled on the Motor Bureau of Ireland's insurance scheme which covers
uninsured drivers. Victims of an accident that involve an uninsured driver can claim from
the Motor Bureau scheme. This scheme is funded by a levy paid by everyone who has
motor insurance. During the past ten years, approximately 700 million was claimed, or
70 million per annum.
What Deputy Daly proposed would bring in almost half that amount, 32 million. A
considerable part of the 70 million per annum was for commercial claims which the
Deputy believes should be dealt with separately. As an example, in the 2012 flood event,
the entire payout was 54 million, of which 38 million went to the commercial claims of
487 businesses, while 15 million went to 627 households. Deputy Dalys proposals also
bear similarities to the Flood Re agreement (above) between the UK government and the
Association of British Insurers. Ms Gillian Powell, of Bandon Flood Group nevertheless
made a case for including businesses and commercial policyholders, as they are the
people who pay wages.
Senator Labhrs Murch noted that he does not see how there can be a solution
unless there is a partnership between the State and the insurance industry. He gave the
example of the private health insurance sector, into which he said that the Government
had an input. For example, if he had paid private health insurance for ten or 12 years
and then got a bad run of health it is not possible for the insurance company to say it
will not continue to cover him. In the Senators view, there is no difference between that
and the situation in regard to property insurance.
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8.6.3 OPPOSITION TO A LEVY

Insurance Ireland stated that it is not tenable to ask policyholders in general to absorb
the cost of losses, nor is it sustainable from an insurance business model perspective. As
Insurers spread risk throughout the world through the mechanism of reinsurance, it is
vital that insurers act prudently with regard to flooding risks to ensure that affordable
reinsurance cover is maintained for all policyholders. It was the position of Insurance
Ireland that policyholders should not be expected to subsidise the losses of those for
whom future flooding was highly likely.
Mr. Doyle of the Irish Rural Dwellers Association expressed the view that there should be
no need for a levy on the person whose property is not subject to flooding. He accepted
that if a person's property is subject to flooding no insurance company will take on that
risk. However, he thought that does not mean that person as a citizen who pays his
taxes should not have the same protection as a person in an urban area whose problem
may be solved by taxpayers' money by way of defences. The risk must be equalised.
How that is to be financed Mr. Doyle could not say.
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8.7 RIVER SHANNON: PROPOSED STRATEGY TO REDUCE SUMMER FLOODING

Mr. Silke (IFA) advocated that the Minister of State with responsibility for the OPW must
implement a strategy to reduce summer flooding of the River Shannon, to include:
An early warning system for extreme weather patterns;
Introduction of a system of allowing river water to move on when heavy

rainfall is forecast and occurs; and
Essential maintenance work to be carried out on the River Shannon (see

detailed recommendations on the maintenance of the River Shannon from the
Committees previous report).71
He urged that all of these measures be given legislative effect.

However, the OPW witness had identified EU and Irish legislative barriers to the
approach desired by the IFA. In the interim until the CFRAM study is complete and
implemented, it may be necessary to look at alternative approaches, as in the example
of Belgiums National Disaster Fund or measures implemented in Argentina.
8.8 OTHER MEASURE PROPOSED

The Joint Committee advocates that the Central Bank of Ireland conduct an inspection
into a significant sample of properties which have no history of flooding yet the property
owners have been refused cover or had their premiums increased. This inspection should
lead to a determination of the appropriate measures to be taken in these instances.
71
Accessed at: http://www.oireachtas.ie/parliament/media/Report.pdf.
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9. POSTSCRIPT: RECENT DEVELOPMENTS

9.1 MEMORANDUM OF UNDERSTANDING BETWEEN INSURANCE IRELAND
AND THE OPW
A Memorandum of Understanding (MoU) 72 between Insurance Ireland and the OPW on
the sharing of information regarding completed flood defence works was signed on 24th
March 2014. The MoU outlines the principles of agreement, between the parties, on the
provision of information to insurers to facilitate the availability to the public of insurance
against the risk of flooding.73 The anticipated outcome of this arrangement is that the
insurance industry will have greater understanding of the extent of the protection
provided by completed OPW flood defence works and will reflect this in assessing the
provision of flood insurance to householders in areas where works have been
completed.74
The MoU came into effect on 1st June 2014 and commits insurers to take full account of
information provided by the OPW on completed flood defence schemes when assessing
exposure to flood risk.75 It also commits the OPW to providing Insurance Ireland with
data on all completed OPW flood defence schemes 76 showing the design, extent and
nature of the protections offered by these works. These works are completed on a
prioritised basis and, once completed, it is expected that the availability of flood
insurance in affected areas would increase.77
For Memorandum of Understanding between Insurance Ireland and the OPW, March 2014, see
http://www.opw.ie/en/media/MoU%20Insurance Ireland-OPW%2020140324%20V1-2.pdf.
73 See PQ 18120/15, dated 12 th May 2015.
75 Ibid.
76 For information on completed OPW flood defence schemes see http://www.opw.ie/en/completed/.
72
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9.1.1 WHAT INFORMATION HAS THE OPW PROVIDED TO INSURANCE IRELAND TO

DATE?78
As of 12th May 2015, the OPW has provided the insurance sector with details of 16
completed Flood Relief schemes. Under the Catchment Flood Risk Assessment and
Management
(CFRAM) Programme, detailed flood hazard maps for 300 at-risk
communities throughout the country are being produced which, following public
consultation, will be made available publicly, leading to the finalisation of the maps and
the development of draft Catchment Flood Risk Management Plans.
These Plans will include an examination of all possible options to address the flood risk in
the identified locations and will recommend a set of measures to deal with and manage
the risk. Information on the structural measures arising from the CFRAM programme will
be provided to the Insurance industry in accordance with the MoU.
On 28th April 2015, when asked when the CFRAM programme would be completed, the
Minister of State at the Departments of Finance, Public Expenditure and Reform and the
Department of the Taoiseach with Special Responsibility for the OPW, Mr. Simon Harris,
T.D., stated:79
the
Catchment
Flood
Risk
Assessment
and
Management
(CFRAM)
Programme has three principal milestones:
Preliminary Flood Risk Assessment (completed);
Predictive Flood Mapping (for finalisation 2015);
Flood Risk Management Plans (for finalisation 2016).
The MoU requires the provision of data by Insurance Ireland to the OPW about areas
impacted by flood loss. The MoU will not guarantee the availability of flood risk cover in
the locations concerned. 80 In January 2015, Insurance Ireland provided some general
See PQ 18120/15, dated 12th May 2015.

See PQ 16354/15.
80 See oral presentation by Mr. Tony Smyth, Director of Engineering Services, to the Joint Committee on
Finance, Public Expenditure and Reform, 15 th April 2015, at
http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/committeetakes/FIJ
2015041500002?opendocument#C00100
78
79
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and provisional data to the OPW about current levels of flood cover for households and
businesses affected by the completed flood defence schemes (twelve were completed at
that time).81 While the results are tentative, the data provided to the OPW indicated
that flood risk insurance is available in areas where Flood Relief schemes have been
completed by the OPW. 82 Speaking to the Dil on 19th May 2015, 83 Minister for
Finance, Mr. Michael Noonan T.D. said:
While this report showed some improvements, it is expected that a fuller and more
detailed report on progress under the MoU will be made available to OPW after June
2015.84
I will assess the progress reported to OPW in June and will consider whether
the current approach is delivering the expected results and whether other approaches
need to be considered.
To date, the OPW has provided data in agreed formation to Insurance Ireland on 16
completed schemes, and Insurance Ireland members are committed to take this
information into account when assessing exposure to flood risk within these areas.
According to the OPW, early indications from the insurance sector are that flood risk
insurance is widely available in areas where flood relief schemes have been completed
by the OPW. It expects to receive in the near future results of a more recent survey by
Insurance Ireland on this subject.85
Ibid.
Ibid.
83 See PQ dated 19th May 2015, 19474/15.
84 When the first full renewal cycle following the MoU has been completed.
85 Letter from OPW to the Committee Clerk, 25 September 2015.
81
82
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9.2 JOINT INSURANCE IRELAND / OPW FLOOD WORKING GROUP

Following the receipt of provisional data by the OPW from Insurance Ireland, the
Insurance Ireland - OPW flood working group met, along with the Department of
Finance.86 A subsequent meeting took place on 3rd March 2015, with a further meeting
scheduled for late April 2015. 87 In general, the working group meets monthly on an
ongoing basis. There is no report and/or recommendations from its work to date.
9.3 NATIONWIDE FLOOD WARNING SYSTEM

The OPW engaged a firm of engineering consultants to carry out a Strategic Review of
Options for Flood Forecasting and Flood Warning in Ireland. Following consideration of
the consultants report and consultation with relevant departments and agencies, the
OPW in conjunction with Met ireann proposed the introduction of a new interim National
Flood Forecasting Service as the first stage of the implementation of a full national flood
forecasting and warning service. The proposed service would be introduced as an
extension to the existing Met ireann weather and related forecasting services. This
proposal is being considered by the Department of Public Expenditure and Reform in the
context of the Budget estimates process.
88
The OPW has been liaising with the
Department of Public Expenditure and Reform and understands that this Department is
considering the proposal in the context of the provisions of the Budget and the work of
the Interdepartmental Committee that is due to report to the Government next Spring
on the Whole of Government policy measures to support the OPW's Flood Risk
Management Plans arising from the CFRAM programme.
See oral presentation by Mr. Tony Smyth, Director of Engineering Services, to the Joint Committee on
Finance, Public Expenditure and Reform, 15th April 2015. Accessed at:
http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/committeetakes/FIJ
2015041500002?opendocument#C00100.
87 Ibid.
88 Letter from OPW to Committee Clerk, 25 September 2015.
86
133 | P a g e
9.4 FLOOD MAPPING / RISK ASSESSMENT

The OPW is currently carrying out the Catchment Flood Risk Assessment and
Management (CFRAM) Programme, a comprehensive programme of assessment for 300
mainly urban areas across all national river catchments. The 300 areas (known as Areas
for Further Assessment or AFAs) were selected following a national Preliminary Flood
Risk Assessment in 2011. Under the CFRAM programme, detailed flood mapping is being
produced in order to identify and map the existing and potential future flood hazards and
risks in each AFA. A statutory consultation process on draft flood maps is scheduled to
take place later this year. Following the finalisation of the flood maps and the
assessment of appropriate flood risk management options, the final output from the
CFRAM programme will be Flood Risk Management Plans for each of the 300 AFAs. These
plans will contain specific measures to address, in a comprehensive and sustainable way,
the significant flood risks identified. The CFRAM programme will be used to determine
national priorities for future State investment in flood protection, including the River
Shannon. Funding for the implementation of the plans is being considered as part of the
Capital Investment Programme.89
89
Ibid.
134 | P a g e
9.5 UK FLOOD REINSURANCE SCHEME

On the 29th January 2015, the European Commission announced that, under EU state
aid rules, it had approved the UK Flood Reinsurance scheme.90 The aim of the scheme is
to ensure the availability of domestic insurance at affordable prices for flood-related
damage.
The Commissioner in charge of competition policy, Ms. Margrethe Vestager, said:
"Today's decision ensures that insurance coverage against high flood risks is
available at affordable prices to those UK citizens who need it most, because
they live in regions vulnerable to flooding. It is a great illustration of how the
Commission and Member States can work together to design effective aid
measures that contribute to important public policy goals."
90
http://europa.eu/rapid/press-release_IP-15-3884_en.htm.
135 | P a g e
10. COMMITTEES RECOMMENDATIONS
1) Upon hearing evidence presented by the stakeholders, the Joint Committee

concluded that among the contributory factors to the problem of getting
affordable insurance cover for flooding are the increased incidence of severe
weather events combined with increased development on flood plains and lowlying coastal areas. Due to the anticipated increase in precipitation events which
may give rise to more frequent flooding, the Committee considers it prudent that
the Department of the Environment, Community and Local Governments 2009
Planning Guidelines for Flood Risk be amended and that consideration be given to
a ban on future building on flood plains and in low-lying coastal areas which are
prone to sea flooding.
2) The Committee noted that since the publication of the Guidelines for Flood Risk
Management 2009, the most severe floods have occurred almost on an annual
basis. The city of Cork alone has recently experienced two catastrophic flood
events in 2009 and 2014. This would indicate the need for a review of these
Guidelines with a view to their reassessment.
3) Another factor identified by the Committee is the problem of householders located
in geo-coded areas who were refused cover or had their premiums increased
even though their property had not been flooded. The Committee heard from
organisations representing those who have been excluded from flood cover, or
are at risk of being excluded, with the result that their homes are no longer
mortgage-able and the value of their homes plummets. However, the Committee
was informed by insurance industry witnesses that geo-coding pinpoints a
property, so there is confusion as to the reason for this problem. This issue
requires a systematic investigation by the Central Bank of Ireland to determine its
extent and advise on appropriate measures.
136 | P a g e
4) The OPW outlined to the Committee the considerable investment that the State
has made in the construction of flood defences and that the insurance industry
has benefited considerably from this through reduced claims payment costs for
flooding. However, representatives of the insurance industry submitted that more
Government investment in structural defences is needed to preserve flood
insurance in high-risk areas, and that current levels of implementation of flood
defences need to improve.
The Committee would urge sustained levels of State investment in flood defences
and river maintenance in vulnerable areas. In particular, investment is required
to ensure an effective river maintenance programme on the Shannon; to remove
the impediments in the Shannon and try to reduce water levels to the lowest level
consistent with navigation purposes so that the river is able to take additional
water at critical times; put in place an effective flood warning system; and carry
out essential maintenance work on the Shannon, including removal of silt and
trees.
Such funding such should be carefully targeted in accordance with the findings,
recommendations and priorities set out in the Catchment Flood Risk Assessment
and Management Programme currently being conducted by the OPW.
5) The Committee considers it necessary to extend nationwide the successful flood
warning systems operated by some local authorities. In the UK, for example, a
Floodline is in operation with a website and phone number which gives local and
national flood warnings. This is managed by their Environment Agency and
available on their website. The Floodline phone number is available on weather
forecasts. The Committee therefore welcomes the proposal from the OPW in
conjunction with Met ireann to introduce a new interim National Flood
Forecasting Service as the first stage in the implementation of a full national flood
forecasting service.
137 | P a g e
6) An issue that came to light during the hearings was the wish of the insurance
industry for more information exchange and co-operation between the industry
and the State authorities on flood mapping and on the design of Flood
Remediation works. On the initiative of the Joint Committee, a Working Group
was established with the objective of:
a. matching the insurance industrys priority areas with State planning for
Flood Remediation works; and
b. informing the industry of the technical standards of the State works so
that insurance underwriters can take this into account in assessing risks.
A Memorandum of Understanding between Insurance Ireland and the OPW was
signed in March 2014, agreeing a basis on which information can be provided to
the insurance industry on Flood Relief schemes completed by the OPW in relation
to areas impacted by flood loss. It commits insurers to take full account of
information provided by the OPW on completed flood defence schemes when
assessing exposure to flood risk.
Our ambition is that this will lead to the inclusion of properties that were
previously excluded from insurance and to the reduction of premiums to more
affordable levels. The Committee welcomes enhanced co-operation between the
insurance industry and State authorities, but the public needs to know that
defence works, once completed, are having an impact on premiums and the
insurance products being offered to customers. Early indications from the
insurance sector are that flood risk insurance is widely available in areas where
flood relief schemes have been completed by the OPW.
138 | P a g e
7) Notwithstanding these efforts, further measures may be necessary to support

those without insurance. A partnership between the government and the
insurance industry may be necessary to forge a new agreement for the provision
of insurance to policyholders in localities excluded from flood cover. A number of
such partnership schemes were proposed by stakeholders, Committee members
and other Members.
The UK model may be instructive. In 2008, a Statement of Principles agreement
was established between the UK government and the Association of British
Insurers (ABI). This agreement aimed to keep insurance costs down for those
households in flood risk areas. The ABI agreed to offer such households
affordable home insurance in return for government development of new flood
defences and reinforcement of existing ones. In July 2013, a new scheme was
introduced to cover losses of UK householders who can no longer afford insurance
cover. Under the new arrangements, a new nonprofit making insurance fund,
known as Flood Re, has been established to provide insurance cover to 500,000
households in the worst affected parts of the UK. Under Flood Re, every
household in the country will pay a small levy (of 10.50) on their insurance
premium to fund a pooled subsidy for those most at risk of flooding, to ensure
they can still obtain affordable home insurance.
A proposal along these lines, in the form of a trust fund, partly funded by a levy
on the insurance industry itself or on all holders of property insurance, was
suggested to the Committee, and ought to be given serious consideration. The
Committee is however cognisant of the fact that non-life policy holders already
pay levies of 5% on their policies, and a continual extension or increase in levies
would not be sustainable.
139 | P a g e
8) Alternatively, or in the interim, various models in place in other countries should

be examined to see what can be learned. In a number of European countries, the
State intervenes by providing natural catastrophe insurance. A scheme similar to
the Belgian National Disaster Fund scheme could be considered. The scheme
provides fund in very limited circumstances from which claimants can get repairs
after disasters such as natural disasters (floods, earthquakes, discharge or
overflow of public sewers, landslides and subsidence of soil). Another model
which might be considered is Frances Caisse Centrale de Rassurance (CCR) /
Central Reinsurance Fund, which is a reinsurance company entirely owned by the
French Republic. It is responsible for designing, implementing and managing
instruments to meet the coverage of exceptional risks in the service of its
customers and the public interest. These include reinsurance of risks of natural
disasters.
These models can provide the State with examples of how it can intervene to
ensure all citizens have access to flood insurance. However, it must be
acknowledged that there is no perfect solution to this issue.
9) If, after examining the various models, no adequate solution can be reached, the
State could consider the merits of introducing legislation that would compel
insurance providers to provide flood insurance to everyone. The Committee,
however, views this as a last resort measure if all other potential solutions have
been exhausted.
140 | P a g e
141 | P a g e
11. APPENDIX 1 - GLOSSARY

Adverse selection: When you do business with people you would be better off
avoiding. This is one of two main sorts of market failure often associated with insurance.
Adverse selection can be a problem when there is asymmetric information between the
seller of insurance and the buyer; in particular, insurance will often not be profitable
when buyers have better information about their risk of claiming than does the seller.
Ideally, insurance premiums should be set according to the risk of a randomly selected
person in the insured slice of the population (55-year-old male smokers, say). In
practice, this means the average risk of that group. When there is adverse selection,
people who know they have a higher risk of claiming than the average of the group will
buy the insurance, whereas those who have a below-average risk may decide it is too
expensive to be worth buying. In this case, premiums set according to the average risk
will not be sufficient to cover the claims that eventually arise, because among the people
who have bought the policy more will have above-average risk than below-average risk.
Putting up the premium will not solve this problem, for as the premium rises the
insurance policy will become unattractive to more of the people who know they have a
lower risk of claiming. One way to reduce adverse selection is to make the purchase of
insurance compulsory, so that those for whom insurance priced for average risk is
unattractive are not able to opt out.
Source: http://www.economist.com/economics-a-to-z
CFRAM: Catchment Flood Risk Assessment and Management (CFRAM) programme to
identify and assess flood risk. A comprehensive national initiative to systematically
identify, assess, document and report on the most significant flood risks throughout the
country. The CFRAM programme will generate detailed flood maps showing flood extents
and other flood parameters such as depth and velocity. They will recommend an
integrated management plan and prioritised measures to address flood problems in
areas of significant risk in each major catchment in the country.
The OPW provides the following useful Web site about CFRAM:
http://www.cfram.ie/
142 | P a g e
Claims specialist: A professional who assists insurance claimants to claim from

insurance companies (engaged by claimants)
Geocoding: The process of converting street addresses or other locations (ZIP codes,
postal codes, city & state, airport IATA/ICAO codes, etc.) to latitude and longitude, which
can
be
entered
into
GPS
device
or
geographical
software.
Source:
http://www.gpsvisualizer.com/geocoding.html.
GPS: Global Positioning System (GPS) is a technology that uses the position of satellites
to determine locations on earth. GPS can calculate the longitude and latitude of locations
and transmit this information to a receiver, which enables the person using GPS to
correctly locate destinations.
IFA - Irish Farmers Association www.ifa.ie
Loss Adjuster: A professional who is appointed by insurance companies to investigate
the circumstances of a claim under an insurance policy and to advise on the amount that
is payable to the policyholder in order to settle that claim. Loss adjusters are generally
appointed by insurance underwriters.
Market Failure: When a market left to itself does not allocate resources efficiently.
Interventionist politicians usually allege market failure to justify their interventions.
Economists have identified four main sorts or causes of market failure.
The abuse of MARKET POWER, which can occur whenever a single buyer or seller can
exert significant influence over PRICES or OUTPUT (see MONOPOLY and MONOPSONY).
EXTERNALITIES - when the market does not take into account the impact of an
economic activity on outsiders. For example, the market may ignore the costs imposed
on outsiders by a firm polluting the environment.
PUBLIC GOODS, such as national defence. How much defence would be provided if it
were left to the market?
Where there is incomplete or ASYMMETRIC INFORMATION or uncertainty.
143 | P a g e
Abuse of market power is best tackled through ANTITRUST policy. Externalities can be
reduced through REGULATION, a tax or subsidy, or by using property rights to force the
market to take into account the WELFARE of all who are affected by an economic
activity. The SUPPLY of public goods can be ensured by compelling everybody to pay for
them through the tax system.
Moral Hazard: One of two main sorts of market failure often associated with the
provision of insurance. The other is adverse selection. Moral hazard means that people
with insurance may take greater risks than they would do without it because they know
they are protected, so the insurer may get more claims than it bargained for.
NPWS (National Parks and Wildlife Service) http://www.npws.ie
OPW (Office of Public Works)
In September 2004 (following the Report of the Flood Policy Review Group), the
Government confirmed the Office of Public Works as the State's lead agency to
implement future policy, and to be tasked with delivering an integrated multifaceted
programme aimed at mitigating future flood risk and impact.
The OPW provides the following useful Web sites about flooding:
http://www.opw.ie/en/floodriskmanagement/
http://www.flooding.ie/
http://www.cfram.ie/
Public Loss Assessors: professionals who assist insurance claimants to claim from
insurance companies (engaged by claimants), not to be confused with the insurance Loss
Adjusters.
144 | P a g e
Reinsurance: Insurance protection bought by an insurer to limit its own exposure. The
availability of reinsurance protection allows an insurer to expand its own capacity to take
on risk. Without a reinsurance facility, each insurer would be able to accept less
business.
SME Small and Medium Enterprises
SVP - Cork Society of Saint Vincent de Paul
145 | P a g e
12. APPENDIX 2 OFFICIAL REPORT, VIDEO RECORDINGS,

WITNESSES
25 September 2012
Irish Insurance Federation: (Now Insurance Ireland)
Mr. Michael Kemp, Chief Executive;
Mr. Michael Horan, Non-life Insurance Manager.
Official report | Video
26 February 2013
Irish Rural Dwellers Association:
Mr. James Doyle, chairman, and Mr. Neilie O'Sullivan, PRO;
GAA: Mr. John Kelly;
IFA: Mr. Sean Brosnan;
the McGillycuddy Reeks Study Group: Mr. Michel O'Connell.
Official Report | Video
12 March 2013
Irish National Flood Forum
Mr. Enda ODonovan, Director & Honorary Secretary;
Cork Society of St Vincent de Paul: Mr. Brendan Dempsey;
Dodder Flood Group: Seaosaimhnn N Bheoglaoich;
Bandon Flood Group: Ms Gillian Powell;
Skibbereen Flood Group: Mr. Michael Thornhill;
Ballinasloe Flood Group: Mr. Mick Tully.
19 March 2013
Irish Insurance Federation
Mr. Kevin Thompson, chief executive officer;
Mr. Michael Horan, non-life insurance manager.
146 | P a g e
26 March 2013
Kildare County Council
Michael Malone, County Manager;
Mr. Alan Dunney, Senior Executive Engineer;
Mr. Joe Boland, Director of Services for water services and the environment.
16 April 2013
Irish Claims Consultants Association:
Mr. amonn Downey, acting president.
Owens McCarthy, claims specialists:
Mr. John O'Donoghue, managing director
McCarthy Insurance Group:
Mr. Paul Kavanagh.
Society of St. Vincent de Paul (Cork):
Mr. Brendan Dempsey.
23 April 2013
Office of Public Works
Tony Smyth, Director of Engineering Services;
Liam Basquille, Principal in Engineering Services.
147 | P a g e
13. APPENDIX 3 ORDERS OF REFERENCE OF THE COMMITTEE

ESTABLISHMENT OF THE DIL SELECT COMMITTEE
[ORDER OF THE DIL 12 JUNE 2012]
With effect from Tuesday, 19th June, 2012 the following committee was established:
Select Committee on Environment, Culture and the Gaeltacht
Departments within the remit of the select committee
Department of the Environment, Community and Local Government
Department of Arts, Heritage and the Gaeltacht
Number of members of the select committee: 15
ESTABLISHMENT OF THE SEANAD SELECT COMMITTEE

[ORDER OF THE SEANAD 12 JUNE 2012]
With effect from Tuesday, 19th June, 2012 the following committee was established:
Select Committee on Environment, Culture and the Gaeltacht
Departments within the remit of the select committee
Department of the Environment, Community and Local Government
Department of Arts, Heritage and the Gaeltacht
Number of members of the select committee: 6
ESTABLISHMENT OF THE JOINT COMMITTEE

[FIRST MEETING 17 JULY 2012]
[Dil] Select Committee on Environment, Culture and the Gaeltacht

[Seanad] Select Committee on Environment, Culture and the Gaeltacht
Chairman: Michael McCarthy T.D.
Vice Chairman: Noel Coonan T.D.
Number of members of the Joint Committee: 21
148 | P a g e
A. FUNCTIONS OF THE COMMITTEE DERIVED FROM STANDING ORDERS [DSO 82A;

SSO 70A]
(1)
The Select Committee shall consider and report to the Dil on
(a) such aspects of the expenditure, administration and policy of the relevant
Government Department or Departments and associated public bodies as the
Committee may select, and
(b) European Union matters within the remit of the relevant Department or
Departments.
(2)
The Select Committee may be joined with a Select Committee appointed by Seanad
ireann to form a Joint Committee for the purposes of the functions set out below, other
than at paragraph (3), and to report thereon to both Houses of the Oireachtas.
(3)
Without prejudice to the generality of paragraph (1), the Select Committee shall
consider, in respect of the relevant Department or Departments, such

(a) Bills,
(b) proposals contained in any motion, including any motion within the meaning of
Standing Order 164,
(c) Estimates for Public Services, and
(d) other matters as shall be referred to the Select Committee by the Dil, and
(e) Annual Output Statements, and
(f) such Value for Money and Policy Reviews as the Select Committee may select.
(4)
The Joint Committee may consider the following matters in respect of the relevant
Department or Departments and associated public bodies, and report thereon to both
Houses of the Oireachtas
(a) matters of policy for which the Minister is officially responsible,
(b) public affairs administered by the Department,
(c) policy issues arising from Value for Money and Policy Reviews conducted or
commissioned by the Department,
(d) Government policy in respect of bodies under the aegis of the Department,
149 | P a g e
(e) policy issues concerning bodies which are partly or wholly funded by the State or
which are established or appointed by a member of the Government or the Oireachtas,
(f) the general scheme or draft heads of any Bill published by the Minister,
(g) statutory instruments, including those laid or laid in draft before either House or
both Houses and those made under the European Communities Acts 1972 to 2009,
(h) strategy statements laid before either or both Houses of the Oireachtas pursuant to
the Public Service Management Act 1997,
(i) annual reports or annual reports and accounts, required by law, and laid before
either or both Houses of the Oireachtas, of the Department or bodies referred to in
paragraph (4)(d) and (e) and the overall operational results, statements of strategy
and corporate plans of such bodies, and
(j) such other matters as may be referred to it by the Dil and/or Seanad from time to
time.
(5) Without prejudice to the generality of paragraph (1), the Joint Committee shall
consider, in respect of the relevant Department or Departments
(a) EU draft legislative acts standing referred to the Select Committee under Standing
Order 105, including the compliance of such acts with the principle of subsidiarity,
(b) other proposals for EU legislation and related policy issues, including programmes
and guidelines prepared by the European Commission as a basis of possible legislative
action,
(c) non-legislative documents published by any EU institution in relation to EU policy
matters, and
(d) matters listed for consideration on the agenda for meetings of the relevant EU
Council of Ministers and the outcome of such meetings.
(6) A sub-Committee stands established in respect of each Department within the remit
of the Select Committee to consider the matters outlined in paragraph (3), and the
following arrangements apply to such sub-Committees
(a) the matters outlined in paragraph (3) which require referral to the Select
Committee by the Dil may be referred directly to such sub-Committees, and
(b) each such sub-Committee has the powers defined in Standing Order 83(1) and (2)
and may report directly to the Dil, including by way of Message under Standing Order
87.
150 | P a g e
(7) The Chairman of the Joint Committee, who shall be a member of Dil ireann, shall
also be the Chairman of the Select Committee and of any sub-Committee or Committees
standing established in respect of the Select Committee.
(8) The following may attend meetings of the Select or Joint Committee, for the purposes
of the functions set out in paragraph (5) and may take part in proceedings without
having a right to vote or to move motions and amendments
(a) Members of the European Parliament elected from constituencies in Ireland,
including Northern Ireland,
(b) Members of the Irish delegation to the Parliamentary Assembly of the Council of
Europe, and
(c) at the invitation of the Committee, other Members of the European Parliament.
151 | P a g e
B. SCOPE AND CONTEXT OF ACTIVITIES OF COMMITTEES (AS DERIVED FROM

STANDING ORDERS [DSO 82; SSO 70]
(1) The Joint Committee may only consider such matters, engage in such activities,
exercise such powers and discharge such functions as are specifically authorised under
its orders of reference and under Standing Orders.
(2)
Such matters, activities, powers and functions shall be relevant to, and shall arise
only in the context of, the preparation of a report to the Dil and/or Seanad.
(3) It shall be an instruction to all Select Committees to which Bills are referred that they
shall ensure that not more than two Select Committees shall meet to consider a Bill on
any given day, unless the Dil, after due notice given by the Chairman of the Select
Committee, waives this instruction on motion made by the Taoiseach pursuant to Dil
Standing Order 26. The Chairmen of Select Committees shall have responsibility for
compliance with this instruction.
(4) The Joint Committee shall not consider any matter which is being considered, or of
which notice has been given of a proposal to consider, by the Committee of Public
Accounts pursuant to Dil Standing Order 163 and/or the Comptroller and Auditor
General (Amendment) Act 1993.
(5) The Joint Committee shall refrain from inquiring into in public session or publishing
confidential information regarding any matter if so requested, for stated reasons given in
writing, by
(a) a member of the Government or a Minister of State, or
(b) the principal office-holder of a body under the aegis of a Department or which is
partly or wholly funded by the State or established or appointed by a member of the
Government or by the Oireachtas:
Provided that the Chairman may appeal any such request made to the Ceann Comhairle
/ Cathaoirleach whose decision shall be final.
152 | P a g e
153 | P a g e
14. APPENDIX 3 MEMBERS OF THE JOINT COMMITTEE
Deputies
Mr James Bannon TD (Fine Gael)
Mr Noel Coonan TD (Fine Gael) Leas-Chathaoirleach (Vice Chairman)
Ms Ruth Coppinger TD (Socialist Party)
Mr Barry Cowen TD (Fianna Fil)
Mr Robert Dowds TD (Labour)
Mr Eamonn Maloney TD (Labour)
Mr Michael Mc Carthy TD (Labour) Cathaoirleach (Chairman)
Ms Helen McEntee TD (Fine Gael)
Mr Tony Mc Loughlin TD (Fine Gael)
Ms Michelle Mulherin TD (Fine Gael)
Ms Catherine Murphy TD (Independent)
Mr Fergus ODowd TD (Fine Gael)
An t-Uasal Sen Fearghal TD (Fianna Fil)
Mr Brian Stanley TD (Sinn Fin)
An t-Uasal Peadar Tibn TD (Sinn Fin)
Senators
Senator Terry Brennan (Fine Gael)
Senator Cit Keane (Fine Gael)
Senator Denis Landy (Labour)
An Seanadir Fiach Mac Conghail (Neamhsplech) (Independent)
An Seanadir Labhrs Murch (Fianna Fil)
Senator Ned OSullivan (Fianna Fil)
154 | P a g e
Notes
1. Deputies appointed to the Committee by order of the Dil on 12 June 2012
2. Senators appointed to the Committee by order of the Seanad on 14 June 2012
3. Deputy Ciarn Lynch elected as Cathaoirleach on 19 June 2012
4. Deputy Noel Coonan elected as Leas-Chathaoirleach on 19 June 2012
5. Deputy Barry Cowen replaced Deputy Niall Collins by Order of the Dil on 19 July
2012
6. An Teachta Sen Fearghal replaced Deputy Robert Troy by Order of the Dil on 19
July 2012
7. Deputy Michael Mc Carthy replaced Deputy Ciarn Lynch by Order of the Dil on 10
October 2012
8. Deputy Michael Mc Carthy elected as Cathaoirleach on 16 October 2012
9. Deputy Michael Colreavy replaced Deputy Sandra McLellan by Order of the Dil on 17
January 2013
10. Deputy Peadar Tibn replaced Deputy Michael Colreavy by Order of the Dil on 22
January 2013
11. Senator Pat ONeill replaced Senator Catherine Noone by Order of the Seanad on 19
July 2013
12. Senator Hildegarde Naughton replaced Senator Pat ONeill by Order of the Seanad on
26 September 2013
13. Deputy Ruth Coppinger replaced Deputy Luke Ming Flanagan by Order of the Dil on
11 June 2014
14. Deputy Robert Dowds replaced Deputy Kevin Humphreys by Order of the Dil on 17
July 2014
15. Deputy Eamonn Maloney replaced Deputy Gerald Nash by Order of the Dil on 17
July 2014
16. Deputy Fergus ODowd replaced Deputy Paudie Coffey by Order of the Dil on 2
December 2014
17. Senator Terry Brennan replaced Senator Hildegarde Naughton by Order of the
Seanad on 2 December 2014
18. Deputy Helen McEntee replaced Deputy Marcella Corcoran Kennedy by Order of the
Dil on 26 February 2015
155 | P a g e
Notes
156 | P a g e

Oireachtas Report On Flooding and The Property Insurance Industry

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Tithe an Oireachtais

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Report of the Committee on Flooding and Property Insurance in Ireland 2015

Joint Committee on Environment, Culture and the Gaeltacht

Report of the Committee on Flooding and Property Insurance in Ireland 2015

Report of the Committee on Flooding and Property Insurance in Ireland 2015

Joint Committee on Environment, Culture and the Gaeltacht

Report of the Committee on Flooding and Property Insurance in Ireland 2015

6. STATE AUTHORITIES ROLE IN FLOOD REMEDIATION .............................................................. 94

Report of the Committee on Flooding and Property Insurance in Ireland 2015

9. Postscript: Recent Developments....................................................................................................... 130

Committees Recommendations ................................................................................................. 136

Appendix 1 - Glossary ..................................................................................................................... 142

Appendix 2 Official Report, Video Recordings, Witnesses ........................................... 146

Appendix 3 Orders of Reference of the Committee ......................................................... 148

Appendix 3 Members of the Joint Committee .................................................................... 154

Joint Committee on Environment, Culture and the Gaeltacht

Report of the Committee on Flooding and Property Insurance in Ireland 2015

T scrob agus doineann thar men ar fad

In recent years, Ireland has witnessed a

number of extreme weather events, and

deireanacha agus t codanna den tr go

flooding has become a recurring problem in

hirithe bhfgil faoi uisce ars agus ars

certain parts of the country in particular. It

eile d dheasca sin. Fadfaidh gur ag ir

orthu a bheidh na deacrachta sin sna

intensify in the coming decades as increased

precipitation is forecast for Ireland as a

possible result of climate change.

madidh ar an mbisteach a thitfidh in

Culture and the Gaeltacht heard evidence

gabhltas a fgadh faoi uisce roimhe seo

properties are now excluded from insurance

dolmhaithe anois chumhdach rachais.

cover. This gives rise to financial problems

ironn deacrachta airgid as an mid sin

as businesses and the housing market are

mar go luonn s ar ghntha agus ar an

affected. Furthermore, the Committee heard

that even properties that have not been

flooded have been excluded or had their

dolmhaodh gabhltais nr bdh fin n

go bhfuil madaithe ar a bprimheanna.

The Joint Committee is concerned that

cumhdach rachais ar fil go forleathan fs

agus acmhainn ag inir maoine in irinn

widely available and affordable to property

air. Dist s le fianaise ionadaithe an

owners in Ireland. It heard evidence from

tionscail rachais, ilitheoir ar rachas

representatives of the insurance industry,

Joint Committee on Environment, Culture and the Gaeltacht

Report of the Committee on Flooding and Property Insurance in Ireland 2015

agus chomhlachta Stit a bhonn ag

gabhil doibreacha leaschin tuilte. Ina

engaged in flood remediation works. It also

theannta sin, dist s le roinnt de phobal

heard from some rural dwellers who have

na tuaithe a luonn deacrachta ar leith

experienced a particular set of problems in

orthu mar gheall ar thuilte.

Ar scr na bplit a rinne s ar an bhar, t