London Riots Cost More Than £100m

Posted on Aug 10, 2011 by Sergio Ulloa (G+)

England's insurance companies and loss adjusters have begun the difficult task of calculating damage estimates in the aftermath of the country's worst riot in decades. The three consecutive nights of anarchic rioting and looting conducted by violent youths have left scores of vehicles, houses and businesses destroyed in at least six London boroughs, and as the violence now spreads to other British cities, police are bracing for further unrest. The trouble first began on Saturday night, August 6th, after a protest was held in the Tottenham area of North London over the fatal police shooting of local resident Mark Duggan, 29. Observing a subdued police presence, hooligans then apparently saw an opportunity for widespread criminal behavior and, by using mobile technology to orchestrate attacks, civil unrest was able to spread quickly across London through Peckham, Croydon, Enfield and Hackney, and then to parts of the rest of the country, with subsequent riots now occurring in Birmingham, Bristol, Liverpool, Manchester and Nottingham. The Metropolitan Police Service claim that at least 560 people have been arrested in connection with the violence, arson and looting so far, as "unprecedented violence" continues to be directed at officers and others that stand in the way of the mob. Both UK Prime Minister David Cameron and London Mayor Boris Johnson have cut short their respective summer vacations and returned to the capitol to hold an emergency response meeting. Parliament has also been recalled from its summer recess and will assemble on Thursday to address their embattled constituents. The estimated cost of the riot damages continues to escalate. The Association of British Insurers (ABI) judged the insured losses for the first three nights of rioting in London alone at "well over" £100 million (US$163 million). The London-based trade body, which represents the British insurance industry, had initially estimated the cost of the riots to insurers would reach "at least tens of millions" of pounds, but after another day of riots and subsequent claims calls into its member companies, the ABI had to raise the overall total insured losses tenfold. Nick Starling, Director of General Insurance and Health for the ABI, released a statement urging those affected by the riots to contact their insurance broker as soon as possible and check what they are covered for and arrange for immediate help if necessary. "We have every sympathy for residents and business owners who have suffered damage to their properties," he stated. "This is a time of enormous stress for them and their insurers will be on hand to answer any questions that they may have." The ABI has been quick to reassure customers that they should be compensated for fire, looting, loss of business or damage caused by the riots under their existing home and business insurance policies. "Insurers are working as quickly as they can to deal with claims. However, access to dangerous buildings which are also crime scenes is a serious issue," Starling added."It is too early for us to have an accurate picture of total costs, especially business interruption costs, but insurers are expecting significant losses, of over £100m." Individual insurance companies have not yet released their own damage estimates. According to the ABI, the five largest commercial property insurers in the UK are Aviva, Allianz, Axa, RSA and Zurich. These large commercial insurers are likely to face a large number of claims from home and shop owners in the coming weeks. RSA is already on the line for a £10 million claim after an arsonist completely destroyed a Sony warehouse in Enfield. Jason Harris, Senior Claims Manager for Aviva, confirmed in a statement that the insurer could not determine its losses from the riots yet, but that it would work hard to contact its policyholders and brokers to determine the damage: "So far we have seen a low volume of claims calls, but of course it is early days. Many of the areas affected were still closed off as crime scenes, meaning that many of those affected will not have been able to assess the damage," he said. A Zurich spokesman added that the insurer would do everything it could for customers to help them get back up and running as soon as possible: "Our claims teams have been liaising with our commercial and local authority customers across north, east and south east London both yesterday and this morning to ensure we are aware of any losses incurred, and to start the claims process. Zurich's loss adjusters and major incident teams are on site where possible and they have been assisting on the ground where it is safe for them to do so." Businesses and homeowners who have remained without property insurance may also be eligible for compensation under an obscure 125-year old British law. According to the Riot (Damages) Act of 1886, the local police service, ergo the taxpayer, can be made liable for all property damage caused in the event of a riot, regardless of whether or not the victim is insured. Private insurers themselves would also be able to use this scheme to claim for the amount paid to policyholders who suffered riot-related losses and damages. The Riot (Damages) Act defines any riot as an assembly of more than 12 people whose behavior would cause people to fear for their safety, and would be clearly applicable in this case. Such a claim would need to be filed within 14 days of the event and could only cover physical damage, not the business interruption losses, which often exceed the actual property damage costs for insurance companies. With the riots still ongoing and claims rolling in, market analysts are debating how these violent events in London, and now the rest of England, could change the insurance industry in the country. Insurers are on point now to prove their worth and settle claims as efficiently as possible. Many of these brutalized small businesses will not have the cash flow to survive without a quick settlement . Premium increases on policyholders in the worst affected areas could be incoming and insurers may soon require businesses to add additional defenses to their property. The ultimate price of all this destructive behavior is not just the insurance deductibles. The real estate market and even London's status as a global tourist destination and upcoming host of the Olympic Games may be effected. While we often associate such scenes of civil unrest and violence with more politically tenuous areas of the world, the impact such events can have on the global insurance market remain just as significant.