UK riots to cost insurers "tens of millions"

LONDON (Reuters) - Three nights of rioting in London and other British cities are likely to cost insurers "tens of millions of pounds," the Association of British Insurers (ABI) said on Tuesday.

"It is too early for us to have an accurate picture of total costs, especially business interruption costs, but insurers are working hard to deal with claims coming in which will give a sense of the level and cost of damage," Nick Starling, ABI director of general insurance, said in a statement.

London has been hit by three consecutive nights of riots, looting and arson by masked youths who wrecked shopping streets in parts of the capital. Violence spread to other British cities on Monday, and police are braced for further unrest.

Analysts said a repair bill in the tens of millions of pounds would be easily absorbed by the insurance industry, which paid out 900 million pounds ($1.47 billion) in December alone after freezing weather triggered a surge in claims.

The impact on insurers could be tempered by a 125-year old British law which makes the police liable for property damage caused by rioting.

"The theory is that the police are responsible for keeping law and order and, if they fail, they pay for the damage," said Stuart White, a partner at law firm Reynolds Porter Chamberlain.

Paying to clean up after the riots would put police finances under further pressure amid spending cuts aimed at reining in Britain's budget deficit, although some police forces insure themselves against riot damage.

Police filed insurance claims after being forced to pay for repairs following riots in northern English towns Burnley, Bradford and Oldham in 2001, according to Reynolds Porter Chamberlain's White.

"These days when it is so much more difficult for police to keep up with tweeting rioters, and when the police are under financial strain themselves, there are bound to be calls to revisit this whole area of the law," he said.

Under the 1886 Riots Damages Act, uninsured businesses or insurers seeking to recoup property damage claims filed by their customers must lodge a claim with the police within 14 days.

Insurers still have to cover business interruption costs, which often far exceed property damage claims.

Businesses and households may face some increase in premiums in the worst-affected areas, but there will be little broader price impact because of stiff competition between insurers, said Mohammad Khan, insurance partner at accountants PricewaterhouseCoopers.

Shares in RSA, Britain's biggest commercial insurer, were up 1.3 percent by 1556 GMT, matching a similar rise in rival Aviva's shares.

European insurance stocks have fallen heavily over the past three weeks amid fears critically-indebted eurozone nations could default on their debt, with the Stoxx 600 insurance index losing a fifth of its value since July 22.

The Riots Damages Act defines a riot as more than 12 people "riotously and tumultuously assembled," whose behavior would cause reasonable people to fear for their safety.

"Many people will undoubtedly feel that they fell into that category on the streets of London and elsewhere," said Charles Gordon, a partner at law firm DLA Piper.

($1=0.613 British Pounds)

(Additional reporting by Sudip Kar-Gupta; Editing by Hans-Juergen Peters and Mike Nesbit)