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Who will pay for the gigantic damage from America's riots?

The ongoing unrest in the United States has caused unprecedented damage to American business and infrastructure — at least compared to most of the past similar events in America. What kind of losses can we talk about, who will cover all these enormous losses and what will be the consequences of what is happening for the entire US economy?

The current American unrest in its financial implications may be comparable to the mass protests in Los Angeles in 1992. Precisely those cases of violence and looting were until recently the most expensive for American business and society, the professional publication of the American insurers' Claims Journal reported on June 2.

Who will pay for the gigantic damage from America's riots?

Then the riots began after a similar incident (beatings by the police of black Rodney King) and in six days caused damage in the amount of $775 million, which, in terms of today's purchasing power of the American currency, is $1.42 billion. However, in the spring of 1992 events unfolded mainly only in the Los Angeles metropolitan area — now pogroms and clashes with law enforcement agencies have unfolded in at least 25 major US cities.

As of June 1, the extent of the damage has not yet been estimated. However, the Claims Journal provides a series of evidence confirming that it will be very serious. Specifically, in Pittsburgh, the local public safety department reported 50 damaged businesses and buildings in the city center; the same number of affected companies were recorded in Seattle. In Chicago, the Loop Alliance announced at least 45 damaged properties in the center. In the city of Madison (Wisconsin), the damage was caused to 75 businesses, some of which were looted.

The main blow fell on the American enterprises of small and micro-business — shops, restaurants, public services, etc. For their owners, judging by the reports of the American press, the amount of losses is estimated at tens of thousands of dollars.

For example, the Denver Post newspaper describes the story of a shoe store owner named Zach Monks. He found out that his establishment was robbed at two in the morning on May 30 at the signal from a security company — the police did not appear at the scene. Just a week before, Monks opened his store after lifting the quarantine restrictions, and in a few minutes, 30-40 people who broke into the window took out or destroyed property worth 25 thousand dollars. Jim Ilg, another Denver resident, said it would cost $20,000 to repair broken windows in a hostel where he works as a manager, and these expenses would not be covered by the insurance company. There are dozens of such victims in the city.

The owners of larger businesses suffered serious, sometimes irreparable damage. For example, in Minneapolis on the third day of protests, the Midtown Corner residential complex under construction, 190 apartments, was burned to the ground. According to the Minneapolis business portal Twin Cities Business, it was planned to spend $30 million on construction work on this project. The leadership of Minneapolis, the publication adds, could not say anything about the damage caused to business and public buildings.

Atlanta authorities have taken a similar position, according to the local news outlet AJC. As the representative of the state administration of Georgia explained, it would take several weeks to assess the damage by insurance companies. Nevertheless, a group of Buckhead activists has already calculated that rioters who smashed Peachtree Road for four and a half miles caused damage to a real estate worth $ 10-15 million. And this is not counting the looted property.

Insurance disaster

Lawyers have so far refrained from detailed damage assessments since they classify the current unrest as “continuing events”. The exact figures will be after everything is over, and the lawyers of the victims and insurance companies will take up the matter. Based on previous cases of mass protests in the United States, “debriefing” will be unprecedented.

Until recently, the most famous event in this series on the minds was the protests of 1968, provoked by the Vietnam War and the murder of black preacher Martin Luther King. The riots swept about a hundred US cities, but as the American Institute of Insurance Information further calculated, the damage caused by them in three key protest centers — Baltimore, Chicago, and New York — amounted to only $231 million in current prices. By comparison, Hurricane Harvey, which covered southeastern Texas in 2017, caused $20 billion in damage.

Nevertheless, the first assessments of the current riots by insurers have already been made. Last weekend, the well-known American data analysis and risk assessment company Verisk declared George Floyd's riots a catastrophic event, which means an assumption of damage of more than $ 25 million. Tom Johansmeyer, head of Verisk Real Estate Client Services, said the last time that his company recognized civil unrest as a catastrophic event was the protests in Baltimore in 2015.

For a better understanding of the extent of the damage, Johansmeyer added, it is worth looking at the consequences of last year's riots in Chile. Then the insured damage amounted to $ 2 billion, and a third of the claims came from several large retail chains. In the United States, a spokesman for the insurance business added, the damage from civil unrest generally fits into risks at around $ 100 million. However, if we add to this the requirements of large companies that go beyond the scope of such insurance amounts, then much larger volumes of potential compensation arise.

The latest remark reminds us that one of the first episodes of the protests was the looting of the Target supermarket in Minneapolis. In response, the network announced the closure of several dozen of its points, a similar decision was made by the management of the largest US trading company Walmart. They were followed by dozens of owners of American shops and restaurants, many of which recently opened after the coronavirus lockdown.

The representative of the Institute of Insurance Information explained to the Claims Journal that civil unrest is an insurance event, the occurrence of which is provided for in almost any insurance policy for business owners. Goods stolen by looters are also covered by insurance.

In addition, according to the institute, about 40% of US small and medium-sized companies are also protected by the temporary suspension. Even if the business was closed or operated in a restricted mode due to the coronavirus, most insurance companies will determine its shortfall in revenue based on the annual revenue estimate.

Nevertheless, doubts are already being raised that all the damage to American business will be compensated. “No one, except insurers in the course of private disputes, will not compensate the victims for losses, while the insurers will seek as much as possible reasons for not paying compensation,” said American political scientist Alexei Chernyaev. According to him, during the coronavirus quarantine period, part of the business owners did not pay insurance, so not everyone will be able to claim compensation.

Most companies will be able to rely on insurance to receive compensation for most of the damage, Forrester analyst Suharita Kodali said to Washington Post. GlobalData Retail analyst Neil Saunders believes the impact of the riots will be less noticeable for large companies like Apple and Target, as they have time to close and repair their outlets. However, for small businesses, the expert added, insurance compensation may not be enough to survive: “In normal times, a business would probably have overcome these difficulties without much effort. But immediately after the coronavirus, these events had a devastating effect. "

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