August 11, 2011
Following any disaster, be it man-made, or ‘Act of God’, there will be many losers, but there will also be some big winners. Some people might be surprised by who is who in this story.
First, let’s look at the losers. This past week, a series of riots ravaged London and other parts of the UK. Costs to businesses is estimated so far at GBP £100 million.
The cost to the state will be even higher because of police and law enforcement overtime bills, fire services, equipment, clean-up and repair- not to mention court costs for the 1,000 or so arrests already made. And that’s not all, as we will show you in a minute.
In a time of austerity, this past week’s events will put even further strain on the public purse. Communities will also lose much- loss of confidence, loss of commerce, income and the illusion of safety.
So who are the winners? One question one should always ask after any tragedy or event is “Qui bono?”, translated in latin it means, “who benefits” ?
Surprisingly, first in the line of winners will be… the insurance companies. Received wisdom would normally have it the other way around, but in today’s world where financial institutions make their profits private, and their losses public, it appears that once again, elites will receive a profit windfall from the state.
Grahame Trudgill, head of corporate affairs for the British Insurance Brokers’ Association (BIBA), has announced that insurance companies have the right to reclaim any money they have paid out, under the Riot Damages Act of 1886. What this essentially means is that due to the UK Riots, Britain’s police forces will face a bill for potentially hundreds of millions of pounds from the City’s insurance syndicates, because business policy holders’ properties were damaged in the rioting because the “police effectively failed to keep law and order”.
Yes you heard that right. We will be covering their costs.
In recent years financial institutions like the insurance giants have found a new ready source of almost unlimited cash that enable them to maintain their precious bottom lines- governments.
Bailouts for insurance companies are now so commonplace in 21st century societies that they are accepted as legitimate. They offer a ‘no risk’ scenario for corporations.
In the past, massive payouts meant shortfalls in insurance company profits, and this was understandably bad for City of London business. Large disasters could bankrupt insurance companies, and in many cases around the world, this means that there would be no compensation for large-scale disaster victims, even if they were paying their premiums. The same could be the case with regards to financial collapses and domestic unrest.
So who underwrites the underwriters? Behind those insurance companies you will find the underwriters, or in City nomenclature, they are simply referred to as “the names”, and they are the men who, to a greater or lesser extent, run the country, and the world. And they name never lose money. The corporation may collapse, or be restructured, but the names can never be put at risk. And here we are in the 21st century where insurance giants, like their banking cousins, have discovered in recent years that they can lean on the state, apply pressure on elected representatives who depend on their patronage, and secure cash for their coffers.
In the case of the London and UK riots, you can expect that any businesses located in new “risky zones” like Brixton, Clapham, Tottenham, Lewisham, Enfield, Birmingham or Manchester, will be expected to pay high premiums for insuring their business.
So following this particular man-made disaster- known as mass rioting and vandalism, insurance companies can demand higher premiums, and be compensated from the state- penny for penny, for any claims they have had to pay out. It’s a brilliant business, and business has never been better.
TREND: OTHER INSURANCE BAILOUTS
- A d v e r t i s e m e n t
On a wider scope, companies like AIG have done the same following the financial collapse, cashing in on the ‘no risk’ bets made insuring ridiculous Banking and financial products which they knew were certain to fail. After the collapse, they could simply turn to the government and demand large sums of money, money that would simply put governments further into debt with the very large Banks who were pedaling those same dodgy financial products.
Recently in the US, we saw a similar bailout take place when the Federal government decided to mandate health insurance for every American citizen. After all was said and done, this move guaranteed higher premiums per head for the insurance giants because the government would pay that price. Profits were secure. No wonder it was the insurance industry who wrote Obama’s health care reform bill, and not elected representatives.
OTHER RIOT WINNERS
As a result of the riots, PM David Cameron has predictably drafted up a tough new diet for the public which will include increase police powers of stop and search, surveillance, and rules of engagement. Use of the military on the streets in future is not off the table either. Curfews can now be imposed. We are nearly there, arriving at a full-blown police state.
Based on recent history, Conservative leaders in the UK have always benefited from being tough, meeting public strife with end of a brutal state truncheon. Cameron is no different, and predicably he has taken this route.
Local governments, AKA Councils, will also join in on the opportunity, increasing local taxes, imposing increased security requirements for businesses, and possibly require stricter review of insurance policies that businesses will need to operate.
Police budgets that were on the chopping block only weeks ago will most likely be secured and in some cases expanded. Salaries for the top positions will also go up, as part of the high stakes police state game where fear is the number one motivator, and number one driver of budget spending.
Quietly waiting in the wings are also the private Security firms. The private security business has grown massively since 2001, we have seen this all over the world, most notably in the US and in Europe. Where state budgets are cut for public law enforcement, expect off-budget expenses to be spent with the security industrial complex. Its main sales tool is also fear. These include, guards, CCTV technology, computer software systems, transport, logistics and possible detention. The value of these contracts in the UK alone numbers in the billions of pounds. After the riots, they are the winners.
There is a disturbing dance which has been taking place all over the UK, a dance between a cluster of groups. It’s a mutually beneficial relationship, very much a financially beneficial one too. In a word, it is called extortion, and it is contributing to bringing many businesses and local communities to their knees.
Its wheels are normally greased with brown envelopes and fueled by fear and intimidation. It’s ménage à trois, or in this case it’s a ménage à cinq, between local government, police, security firms, criminal gangs, and behind the curtains quietly sit the insurance syndicates. Each perform a role, most are parasitic relationships, each pay each other under the table, each profit from each other, and each will always ensure the existence of the other.
Failure to address this corruption means that in the event of a future trend of mass social unrest, when the dust clears, the same players will move in the take more wealth and prosperity away from businesses and communities.
The winners and losers… here we go again. When will it end? It will end when the public learn to realise and understand the architecture of the system that lords over them.
The rioters scored an own-goal of course, when they decided to hit chicken shops, shoe stores and cheap electronics vendors. A wasted effort by all accounts. If only those thousands of teenaged rioters and looters knew how their establishment was actually structured, maybe they would have choosen a target that had real revolutionary value.
It will end when communities realise that their family and neighborhood relationships ultimately mean much more, and are more valuable, than their relationships with the state and the corporations who effectively run it.
This post first appeared on 21st Century Wire.