LONDON (Reuters) - Britain plans to exclude large companies from receiving state compensation for damage suffered during civil unrest in an overhaul of the country's riot laws.
In a review of Britain's Victorian-era riot act commissioned in the wake of the riots in the summer of 2011, the government said it could make a system of subsidising insurance for riot damage available only to small businesses.
Britain's riot laws deem the police responsible for keeping public order and, by extension, liable for damage to property if order breaks down.
Insurance companies that pay out on claims from clients who have suffered damage in riots can currently claim compensation from the state.
The 2011 riots started in London as a peaceful protest against a police shooting but spiralled into five nights of violence and looting in a number of English cities.
According to the review, the cost to UK taxpayers of claims related to the 2011 riots, stands at 35.2 million pounds but could rise to more than 100 million pounds.
The review acknowledges that compensating insurers, who take premiums from clients for cover, is controversial because it effectively means they are being "paid twice."
But it concludes the compensation scheme should remain in place for small businesses to prevent insurance in areas prone to civil unrest becoming unaffordable.
"Insurance might be withdrawn from businesses in potential riot areas if the protection they receive from the Act were withdrawn," the review said.
The Association of British Insurers (ABI) gave a cautious welcome to the review which extends the compensation scheme to vehicles and proposes setting up a "riot claims bureau" staffed by insurance experts to assess claims more effectively.
But the ABI warned that the exclusion of large firms from the compensation scheme could prompt them to avoid setting up in deprived areas where they might have boosted the local economy.
"We are concerned that the review recommends that insurer recoveries from the State should be restricted to businesses that turn over less than £2 million a year. This could be a disincentive for some larger firms to locate in some areas," ABI Director General, Otto Thoresen said.
(Reporting by Chris Vellacott. Editing by Jane Merriman)