HC 1456 Home Affairs CommitteeWritten evidence submitted by the Association of British Insurers (ABI)

1. Introduction

1.1 The UK insurance industry is the third largest in the world and the largest in Europe. It is a vital part of the UK economy, managing investments amounting to 24% of the UK’s total net worth and contributing the fourth highest corporation tax of any sector. Employing over 275,000 people in the UK alone, the insurance industry is also one of this country’s major exporters, with a fifth of its net premium income coming from overseas business.

2. The Role of the Insurance Industry Following the Recent Riots

2.1 The insurance industry has played a major role in responding to the recent riots in England. Coverage against damage caused by riots is a standard feature of home and business insurance policies (which is not the case in several other European insurance markets surveyed by the ABI, see Annex 1).

2.2 Insurers and loss adjusters have helped many home owners and businesses that were affected by the riots to get back on their feet by offering practical help and advice, arranging alternative accommodation, providing cash payments to meet their immediate needs etc. As a result, many businesses have been able to set up and continue to trade from different premises. The insurance industry has dealt with thousands of claims resulting from the riots, the total cost of which will exceed £200 million (more detailed figures will be available shortly and will be submitted to the Committee).

2.3 The ABI has also provided advice and guidance on the establishment of the compensation scheme set up by the Government to help the uninsured whose property was damaged during the riots.

3. The Riot Damages Act 1886

3.1 Recent events have also shown clearly that the Riot Damages Act, despite being on the statute books for over a hundred years, remains fit for purpose and a useful piece of legislation which shares the risks between the State and the private sector.

3.2 While the insurance industry offers policies to cover homes, businesses and vehicles against riot damage—and naturally we would encourage people to buy these products, which can be tailored to all kinds of businesses, possessions and properties—the reality is that not everyone takes out insurance. We expect thousands of claims to be made under the Act by the uninsured and without it they would be left uncompensated against acts of violence and looting which were no fault of their own. We believe that, just as victims of crime can be compensated under the Criminal Injuries Compensation Scheme, victims of the recent riots should also be afforded compensation for their losses.

3.3 Insurers can, of course, recover some of their outlay under the Act, but it will, by no means, be all of their outlay. Business, home and car insurance offer wider coverage than is available under the Act (for example, home insurers offer contents cover on a “new for old” basis, whereas the Act is likely to compensate on the basis of the value of the item taking into account any depreciation) and insurers will not be able to recover their costs where policy coverage exceeds the protection provided under the Act.

3.4 It should also be noted that business, home and motor insurance markets are all highly competitive and operate on very tight margins. Contrary to how the industry is often portrayed, profits, where they exist, are not excessive. Riot is a standard feature of property insurance in the UK. However, the availability and price of these products is determined to a large degree by claims experience. The existence of the Riot Damages Act is taken into account by insurers when they are deciding whether to offer cover to a customer and the premium, terms and conditions they wish to offer.

3.5 Without the comfort that insurers take from the existence of the Act and the fact that they can recover a proportion of their losses under it, the insurance market is likely to behave differently than it currently does. Insurers would be more likely to seek to try to assess the risk of rioting and the likely cost of rioting in particular areas and for particular businesses and properties. Claims experience would, undoubtedly be a more significant factor in the minds of underwriters. Consequently, customers based in those areas which had suffered from riots would be more likely to see their premiums rise and the terms and conditions change (for example, through higher excesses for riot or even riot exclusion clauses) than is the case with the protection afforded to insurers and their customers by the Riots Damages Act.

3.6 In conclusion, therefore, while it may seem to some to be perverse for insurers to be apparent beneficiaries under the Riot Damages Act, the reality is that the insured public are the real beneficiaries because they benefit from the wide availability of coverage against riots throughout the UK (in contrast to many insurance markets) and from lower property insurance premiums than would be the case if the Act was not in force.

September 2011


Table to show countries where damage caused by riots is, or is not, a standard feature of home and business insurance policies:

Home/commercial propertyinsurance coverage of rioting





Extensions available for riot damages



Extensions available for riot damages












Extensions available for commercial policies

*Of the providers queried, all compensated home policy holders but only a subset compensated commercial policy holders.



The content of this annex is based on correspondence with various organisations in Europe including the CEA, several national insurance associations and their member firms. As such it may not provide a complete picture of the markets in question.

Prepared 22nd December 2011