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ABI responds to publication of draft Riot Compensation Bill

Following the Government’s response to the Home Office’s consultation on the Reform of the Riot (Damages) Act and the publication of the draft Riot Compensation Bill today, Mark Shepherd, Manager of General Insurance at the ABI, comments:

Mark Shepherd"We are pleased that the Government has listened to the views expressed in the consultation to bring an outdated Act into the modern day, and made a sensible move forward from an arbitrary turnover cap on the type of businesses that can claim, to a £1million per claim limit. The ABI highlighted that the previous proposals would have left all but the smallest of firms able to claim compensation and could have created problems for businesses taking out riot cover as part of their property insurance.

“Although riots are rare, they can have a devastating impact on communities and take years to recover from. 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.”

The ABI has compared how the change from a previously proposed £2million turnover cap to a £1 million per claim limit would have affected an event  such as the riots that took place across England in August 2011:

  • Under the revised proposals for a £1million per claim limit, we estimate that 99% of commercial property claims for material damage from the August 2011 riots would have been fully covered by this limit.
  • This compares to our estimate of only 33% of commercial property claims for material damage during the August 2011 riots coming from businesses with a turnover of less than £2million.

However, the ABI is still concerned about some aspects of the draft Bill:

  • The draft Bill does not appear to cover loss of trade for businesses, loss of rent for landlords, or alternative accommodation costs as a result of a riot.  This could have a serious impact on businesses or residents that have had to cease trading or move out of their homes because of damage to their property.
  • The draft Bill outlines that Police and Crime Commissioners will decide if a disturbance constitutes a riot, however given PCCs  are essentially liable for the cost of damage this appears to create a conflict of interest.  A more independent determination of when a disturbance is a riot may avoid this.

The draft Bill can found on the Government website.

Last updated 01/07/2016