The Association of British Insurers, an industry trade body, said insurers may be able to recoup riot-related claims from government-funded compensation schemes, under the terms of the Riot (Damage) Act of 1886.
The act forces the government to compensate riot victims, which may include insurers, for damages and loss, according to the ABI. The scheme may result in the government absorbing much of the damage cost following the widespread rioting and looting. The ABI on Tuesday estimated the cost to the insurance industry at GBP100 million mark, after upgrading an earlier estimate that put the cost o the riots in the "tens of millions" of pounds.
Riots broke out in London following a fatal police shooting Thursday, and Monday night disturbances spread across the capital and to some regional cities, with rioters looting shops and setting fire to property.
For the act to take effect, the disturbances must amount to "12 or more persons who are present together use or threaten unlawful violence ...as would cause a person of reasonable firmness present to fear for his personal safety." Under the act, loss claims must be submitted within 14 days of damage being caused. However, the ABI is urging the Home Office to increase this to 42 days, as police investigations slow down the claims' process.
Along with coverage against property damage, many firms also have insurance for interruptions to their businesses.
The ABI said it was too early to release concrete damage estimates, and it said that not all policy holders will necessarily be covered for business disruption.
"Most policies are likely to cover business interruption where there has been damage--the issue is going to be for those that haven't been damaged," said James Dalton, from the ABI's property, motor and liability division.
Dalton said this would vary from policy to policy, adding that the ABI is encouraging claimants to contact their insurers to clarify the specifics of their policies.
Eamonn Flanagan, an insurance analyst at Shore Capital, said the final cost will depend on whether the incidents are defined as riots under current legislation.
"If the incidents are deemed as civil unrest or a riot in extreme circumstances, more often than not the insurers may have right to recover losses from the police," he said.
After many disasters, insurers are able to recoup some of their losses by raising prices for the coverage they provide. But Mohammad Khan, a specialist insurance partner from accountancy firm PwC, said the financial impact of the riots was likely to be relatively small.
"There may be some specific increases in premium for the worst-affected areas but, for customers nationwide, there is too much competition for these events to have a significant impact," he said.
RSA Insurance Group PLC, Zurich Financial Services AG and Aviva PLC are among the biggest property insurance companies. A spokeswoman from Aviva said "riot and civil commotion" is covered as standard in all its home and commercial property policies.