A report published by Jennifer A. Kingson at Axios concludes that the riots following the death of George Floyd are the most expensive in U. S. history:
The vandalism and looting following the death of George Floyd at the hands of the Minneapolis police will cost the insurance industry more than any other violent demonstrations in recent history, Axios has learned.
That’s both in absolute and inflation-adjusted dollars. The table included in the piece uses figures from the Insurance Information Institute:
On May 26, 2020 after the death of George Floyd in police custody in Minneapolis, Minnesota, protests and riots broke out in that city and spread over the next weeks to another 140 U.S. cities, including: Washington, D.C.; New York, New York; Chicago, Illinois; Philadelphia, Pennsylvania; and Los Angeles, California.
By June 4 at least 40 cities in 23 states had imposed curfews, and rioting resulted in at least six deaths. National Guard were called in at least 21 states and Washington, D.C.
The Property Claim Services (PCS) a unit of a Verisk Analytics, designated the riots in Minneapolis a catastrophe. The Minneapolis civil disorder is the first time that PCS has compiled insured losses for a civil disorder event since the Baltimore, Maryland, riots of April 2015. Those riots did not result in insured losses reaching $25 million when it occurred, PCS’s threshold for a catastrophe. For the first time, PCS has designated this civil disorder and those that followed across the United States from May 26 to June 8 as a multi-state catastrophe event. PCS has included over 20 states with significant losses for this catastrophe. The 2020 event is the first time since 1992 that PCS has compiled significant insured losses for a civil disorder and declared it a catastrophe. Insured losses for this event are not yet available from PCS. A preliminary estimate from insurance industry analysts would put the range between $500 million and $900 million in insured losses, an estimate that will change as insurers are resurveyed and data is refined.
Meanwhile, at the Foundation for Economic Education Brad Polumbo observes that the figures presented almost certainly understate the full costs:
However, there are many reasons that this figure vastly underestimates the true damage wrought by the looting and violence that has broken out in recent months.
For one, the Axios report only measures insured losses. The obvious problem here is that not all the damages were insured.
As I have previously explained, insurance is no panacea for the societal ills imposed by rioting. Indeed, 75 percent of US businesses are under-insured and about 40 percent of small businesses have no insurance at all. Their untold millions in losses don’t show up in the $2 billion figure.
So, too, insurance doesn’t account for the personal pain and suffering caused by rioting. For example, what about the more than 15 people who died during the unrest? Their lives and their families’ pain don’t get counted in any insurance company’s budgetary analysis. Nor does the pain of those such as an elderly businessman punched in the face while his store was ransacked in Kenosha, Wisconsin manifest itself in total reports on insurance compensation.
Finally, there’s also a loss in sales-based tax revenue from the riots. All of these—insured losses, uninsured loss, pain and suffering, and lost tax revenue—will fall most heavily on largely minority communities least able to afford them.
The Axios piece also points out that the riots were distinctive in occuring in so many places. To that I would add that they are still going on and they have been demographically distinctive.
2020 will prove very hard for underwriters. Industry consolidation means there are fewer of them than there were a generation ago. I expect some of them will pursue civil remedies, suing individuals, municipalities, and states. If orders to law enforcement were issued to hold back from enforcing the law and any of these orders are made public, as in from FOIA suits, there may be personal liability for elected officials as well.