The riots in the capital will have a limited effect on the insurance markets but companies need to react quickly to avoid disruption
The chaotic riots in London and other cities in the UK have caused significant damage and undermined the country’s morale. However, many industry insiders believe that the effect on the insurance market will be limited.
“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,” said Mohammad Khan, partner at PricewaterhouseCoopers (PwC).
“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,” added Khan.
Fitch Ratings believes that the losses from the riots will have no impact on UK insurers' ratings. The policies most likely affected by the riots are residential property, motor, commercial property and business interruption. “It will be most difficult to gauge the ultimate insured costs of business interruption,” said Fitch Ratings in a statement.
“Of immediate concern is the safety of staff and others based at or visiting your premises. Good businesses will be communicating to their staff and customers about the situation about how they have been affected and the approach they are taking to manage disruption,” added James Crask, business continuity senior manager at PwC.
According to PwC, companies affected are likely to have issues with supply or distribution problems, a lack of staff, a decrease in the number of customers in their stores and an increase in the number of online transactions.
On August 11 British Prime Minister, David Cameron, announced that the deadline for claims made under the riot act had been extended from 14 to 42 days. Under the riot (damages) act of 1886, compensation can be claimed from police authorities by individuals or organizations who suffer damage to buildings as a result of a riot.
Insurance brokers Marsh said the safety of staff and assets comes first and emphasised the need for some companies to activate business continuity plans. When making a claim Marsh said it's important to notify your insurers early and pass on reliable data.