Today marks the culmination of more years of work than I initially expected, to help develop legislation that I never want to see used. But today’s commencement of the Riot Compensation Actmarks a seminal moment in how we compensate for the rarely occurring, but devastating when they do, acts of rioting in the UK.
It was over five and a half years ago in August 2011 that the genesis of all of this change occurred, when five days of uncontrolled riots devastated many cities and towns across England causing hundreds of millions of pounds worth of damage.
Since then we have had a host of inquiries, recommendations, policy proposals, consultations, reworked policy proposals and new legislative procedures. Despite the slow progress we welcome the start of the new system as it brings the process for riot damage compensation into the modern day, and retains the fundamental and long-held principle in English law of police liability for riot damage. This means that the much-needed protection for homes and businesses from riot damage continues.
Insurers and the ABI have been central to the Government’s designs for a new system from the start, alongside the Police Authorities. Our experiences of the previous archaic rules under the 1886 Riot Damages Act were vital to arguing for reform post-August 2011.The intention is that this modernised system will benefit riot victims and reduce the time it takes to receive compensation, either for direct claimants or for insurers seeking recoveries for the claims they have paid out. Interim payments and the option for Police Authorities to delegate authority for smaller payments to loss adjusters will help with that.
For insurers, an important principle is now re-codified in the new law – that liability for the material damage caused by a riot lies with the police. This principle extends back centuries, and importantly the ABI was successful in arguing for reform of the Government’s original proposals, which initially intended to drastically scale back this liability. There is no doubt that when central Government footed the bill for the damage in 2011 that a fundamental change to this principle was possible. But the Government’s decision to shift from a turnover cap of £2 million, to a £1 million per claim limit, means that the vast majority of businesses will continue to be covered under the new law. The ABI’s analysis from the 2011 event highlighted that the original turnover cap would not have adequately protected small and medium sized businesses had it been in place when those devastating events occurred, with only 33% of commercial property claims being entitled to recovery. With the £1 million per claim limit, 99% of commercial property material damage claims from those riots would have been fully covered.
Having an Act that reflects our modern society means protection for homes and businesses that need it most. This is good news for commercial lines insurers who want to be able to help businesses have riot cover as a normal part of their insurance. It is also good news for the business community, given how vital insurance cover is for the sustainability and recovery of our local economy when unexpected events happen.
Riots in the UK are thankfully rare, but when they do occur their impact on communities can be devastating. This makes the last five and a half years spent bringing a 130 year old Act into the modern day necessary and important.