Insurers warns of rising premiums

The Irish Insurance Federation (IIF) has today warned of rising premiums in the wake of increased payouts caused by the extreme weather experienced in Ireland in recent months.

The freezing weather in January and the floods of November last year have caused a spike in claims, with insurers paying out almost €300 million to customers whose homes were affected by burst pipes earlier this year. The IIF said the total cost of claims now stood at €541 million.

IIF chief executive Mike Kemp said the rising level of payouts was going to lead to higher insurance costs. He defended increases in insurance premiums of 12 per cent last year saying Ireland had some of the lowest insurance rates in Europe. But Mr Kemp refused to speculate on how much rates might increase this year.

“The combined insurance cost of these two severe weather events [the freezing weather and flooding] that happened in quick succession, is likely to be nearly 60 per cent of annual turnover in the property insurance market," said IIF chief executive Mike Kemp.

"In 2008 insurers saw a 29 per cent increase in household claims and this upward trend continued in 2009, even before the flood and burst pipes claims hit.”

The IIF chief executive said January's freeze was the largest single weather event ever for the insurance industry. And the cost of both the freeze and the floods was more than the combined cost of all other weather events for the past 10 years.

He called for a concerted national approach, with clear ownership to address issues such as improved planning and development rules to take greater account of flood risk. Further investment in flood protection schemes was needed he said and he recommended the establishment of a flood liaison and advice group.

The floods that hit Munster, the west of Ireland and the midlands severely cost insurance firms €244 million. Most of the claims came from Cork, where €141 million of claims for commercial and household property damage were filed. Galway and Clare had claims of €23 million and €16 million respectively.

In comparison, all serious weather events that have occurred in the last decade cost a total of €358 million.

The IIF called on the Government to tackle the threat of further flooding. “Insurance is about protecting against risk and that is the essential vital role we will continue to play in Irish society. However, with increasing frequency and severity of extreme weather conditions, questions inevitably arise as to the future cost and even insurability of some risks, particularly flood risk in some parts of the country," Mr Kemp said.

"Whilst we cannot prevent natural catastrophes and the impact of climate change may only be reversible in the very long term, if at all, there are measures that can be taken to minimise the damage caused by weather events in the future.

"But there has to be a concerted, national approach, with clear ownership, to address issues such as improving planning and development rules to take greater account of flood risk, the priority attached to investment in flood defences, and even practical day-to-day measures such as effective and consistent management and maintenance of watercourses and drainage."

Mr Kemp said builders should be required to bury pipes bringing water into private homes at a sufficient depth to protect them from bursting in cold weather. The depth of pipes is currently only covered by guidelines.

He added that when pipes were burst during the freeze unoccupied homes were more prone to damage because quite often the problem was not discovered as quickly as in an occupied home. As a result the amount of water damage and the consequences were more serious.

"I'm raising the possibility that they [insurance underwriters] might make more of a distinction between those two categories of properties," he said.