OPINION: Changing elements are creating the possibility that some areas that are now insurable will become uninsurable, writes Bill Murdoch.
Today the Irish Insurance Federation (IIF) is scheduled to meet Mr Tom Parlon, who has responsibility for the Office of Public Works. Most people might react with a long yawn; they shouldn't.
The federation wants the establishment of a National Flood Defence Agency to deal with the human and financial costs associated with flooding. With all that rain the State is sodden and more and more places are being targeted by the changing elements.
This is placing pressure on household premiums and raises the possibility that some areas that are now insurable will become uninsurable because of the inability of insurance companies to get reinsurance.
Mr Parlon has reacted with a warning to companies that "it isn't on for insurance companies to say no to claimants". But some areas are, and have been, uninsurable for some time. Also, if an area is perpetually flooded, no insurance company can provide cover because of the certainty.
This year is likely to be one of the blackest periods for claims. A few statistics tell it all.
A freeze on New Year's Eve resulted in 4,495 burst pipes and property insurance claims amounting to €30 million; 3,983 of these were household claims costing €23 million, the remaining 512 claims were commercial property claims costing €7 million.
The February floods concentrated on the east coast, with parts of Dublin (Ringsend) bearing the brunt and leading to 2,933 claims costing €37 million; household claims cost €26 million while commercial property claims accounted for €11 million.
The November floods mainly hit Drumcondra, in Dublin, Dunshaughlin, Co Meath, and parts of Cork city. These costs have yet to be quantified but Hibernian Insurance, one of the insurers involved, reckons it will have to pay between €12 million and €15 million.
The highest amount paid out in the past five years was the December 1997 storm which cost €84 million. Prior to that, the largest loss incurred by Irish property insurers was in August 1986 when Hurricane Charlie weaved its path of destruction; the cost amounted to €47 million.
Last year, Irish property insurers had 147,032 claims. That resulted in a net operating loss of €8.2 million
We have got off fairly lightly compared with other countries. The storms which hit Galveston, Texas, in the US, in September 1900, for example, led to more than 6,000 deaths. The costs were never established. Damages amounted to $20 billion (€20 billion) for the Mississippi river basin flood in 1993; 48 people died.
Curiously, the federation has been trying to arrange a meeting with Mr Parlon since August when floods ravaged the Continent. Arranged meetings are understood to have been cancelled so the federation's proposals do not appear to be seen as a high priority by the Minister.
But there is a great need to have just one body overseeing flooding. At the moment, there is the ludicrous situation of having three organisations involved. The Office of Public Works (OPW) is responsible for arterial drainage and related works. The local authorities look after drainage and land use management while Waterways Ireland, set up recently under the North/South agreement, has responsibilities for navigable waterways.
There is bound to be resistance from some of the bodies involved, but a central authority is needed. This would be more dedicated and focused.
Mr Parlon has said a new review would assess the extent of the flooding problem and would clarify the roles and responsibilities of the various agencies involved. The review group has also been asked to comment on the impact of flooding on the different sections of society and is to recommend criteria for priority expenditure. It comprises OPW, the Departments of Finance and Environment & Local Government, local authorities and representatives from farming organisations. In the meantime, OPW is to continue to be involved in flood-relief schemes.
In Australia there is the flood mitigation programme which appears to work well with case studies showing significant savings and reduction in damages. The measures include land use planning, voluntary purchase, building controls, levees and road sealing. Is there not a message for us there?
Of course, the insurance companies have a vested interest in pushing for measures which are designed to reduce the frequency of claims. Lower claims equate to a better profit and loss account. However, the issues are far wider than the insurance companies. Also, given the human tragedy (my 90 year-old mother-in-law, and her sister, were evacuees from the Drumcondra floods), preventive measures are essential and a single authority is the logical way forward.
Such an authority should have wide sweeping powers. It should give specific warnings of potential floods, monitor river levels and have appropriate strategies in place. Also, planning permissions of new housing developments would have to be approved by the agency.
The federation makes the appropriate comment: "Our planners and public representatives must avoid designating flood-prone land for construction." One wonders why this has happened in the past.
A new flood agency would, of course, have to be properly funded. It may not be generally known but there is a 2 per cent stamp duty levied on all property, motor and liability insurance premiums. That yielded about €70 million in 2001. Property insurance accounted for about quarter, so if this were shifted to a new agency, it could start with €17.5 million. Considerably more funds would be required.
Also, it would be useful to have a mechanism to fine builders (and local authorities) who have built (authorised) estates in flood-prone areas. What about those buyers who have seen their relatively new houses flooded and their equity values plummeting? Who is going to compensate them for a very failed and flawed system?
Clearly changes are needed to deal with flooding. But will Mr Parlon grasp the nettle or allow things to muddle along?
bmurdoch@irish-times.ie
