Loss estimates rise for UK riots as business counts the cost

Those companies affected by the unrest have been buoyed by the UK Prime Minister’s decision to extend the claim notification period allowed under the Riot (Damages) Act of 1886 to 42 days. But there remains some confusion as to whether business interruption (BI) claims will be compensated under the Act. The civil unrest and riots that swept through the UK caused damage to the property of many retailers and other commercial operators as well as major interruption to business. The costs of the riots to both business and insurers is still difficult to assess but, as the ABI figure reveals, are likely to be in the hundreds of millions of pounds.hideCommenting on the impact of the riots on insurance pricing, Mohammad Khan, partner at PricewaterhouseCoopers, said: “It’s difficult to put a value on the cost of the damage as the scope and scale is still changing but, in relative terms, the financial impact on insurers will be small. There may be some specific increases in premium for the worst affected areas but, for customers nationwide, there is also too much competition for these events to have a significant impact. Rating firm Fitch also believes these events may cause insurance prices to rise in loss-affected areas but said the unrest will not be a catalyst for major price changes across the UK. "At current loss estimates, Fitch believes the industry as a whole will be able to absorb these losses into earnings," says Chris Waterman, Managing Director of Fitch's insurance group. However, the rating agency recognises that the situation is fluid and will continue to monitor events to determine if there is any ratings impact. Insurers and the authorities must also confirm how extensively the Riot (Damages) Act of 1886 will shift the economic burden from insurers to the police and ultimately the UK taxpayer. The Act places a strict liability on the police fund to compensate any person or corporate body that has sustained losses as a result of acts of theft or damage to their property arising from a riot. According to Fitch, the Riot Act only covers property damage and not business interruption. But in a guide on the Act law firm Barlow Lyde & Gilbert said that there is some ambiguity on this issue. Until this ambiguity is resolved, BI losses should be included in the claim form to ‘err on the side of caution’, the company continued. “There is growing speculation that such losses may well be covered although it remains to be seen whether such losses will ultimately be accepted by the compensation authority,” it added. In the event that the compensation authority rejects BI losses, the precise wording of any relevant insurance policy will need to be scrutinised to determine the extent of such cover, advised the law firm. Policies that include extensions for contingent business interruption or loss of attraction will likely make recovery of such losses more straightforward, it added. “The key issue is how quickly insurers can deal with claims as many small businesses may not have the cash flow to survive without quick payments and more will not have business interruption insurance. The UK property and casualty insurance industry has learned lessons from previous events, such as floods, and now recognises it can demonstrate value and earn customer loyalty by processing claims quickly and efficiently,” said PwC’s Mr Khan. "Customers may have to check the wording of their policies carefully. Generally events like riots are included within the terms of insurance but there may be exceptions to this,” he added.

Loss estimates rise for UK riots as business counts the cost

Want to read this article?

Read Next

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

Keep yourself informed

Sign up for Commercial Risk’s newsletters

Want to read this article?

Read Next

IQUW launches active assailant cover

Talanx results boosted by HDI Global’s 43% jump in net income

VIG Re confirms Faucret as head of Western Europe

Spike in cloud service outages driven by Google Cloud downtimes

Canopius Group appoints group risk director

Related Articles

Keep yourself informed

Sign up for Commercial Risk’s newsletters