People and businesses will be put at risk of financial hardship if proposed reforms to the way claims for riot damage are paid out go ahead, insurers are warning.
Around £167 million has been paid out to people and firms following the wave of rioting, arson and looting that spread across parts of England in the summer 2011, t he Association of British Insurers (ABI) estimates.
But the ABI warned that "drastic" plans to overhaul the 128-year-old Riot Damages Act would jeopardise insurers' ability to cover such damage in England and Wales as a standard part of property insurance.
It said the proposals could reduce access to insurance and potentially lead to new excesses for riots having to be built into some policies and riots having to be excluded completely from cover in certain areas.
The ABI estimates that for every £10 paid out in compensation after the 2011 rioting, only £1 would be paid out under the reformed Act, leaving "many businesses and motorists facing financial hardship".
It warned that proposals to put new curbs on the Act would leave "all but the smallest firms unable to claim compensation", while car owners could find that the vast majority of vehicle damage is also excluded.
The Government launched a consultation earlier this summer on reforming the 1886 Riot Damages Act , which enables compensation to be paid by the police to home owners and businesses who suffer riot damage to their property or possessions and have no insurance or are under insured.
There is no limit on the amount of compensation payable. Insurers are also able to claim under the Act for any property damage claims paid to customers, which has meant that they have not needed to price for riot cover.
The ABI said that a proposal to limit those businesses who can make a claim to the police under the Act to those with an annual turnover of less than £2 million would leave all but the smallest firms unable to claim. F irms with a turnover of less than £2 million made up only 9% of the total value of commercial property material damage claims in the 2011 riots.
It also said that proposals to o nly include third party motor policies within claims to the police under the Act would leave the "vast majority" of motorists outside it. Around 96% of motorists have comprehensive cover rather than third party.
The ABI also argued that an intention to allow police and crime commissioners to decide what constitutes a "riot" would also create potential conflicts of interest as the police are liable for riot damage.
Huw Evans, director of policy and deputy director general at the ABI, said: " Government proposals to drastically cut back compensation are at odds with its intention to retain the principle that the state is responsible for the costs of riot damage, that has proved its worth for taxpayers for over 100 years.
"Not only does the Act provide important protection for the uninsured, it means insurers can cover riot damage in England and Wales as a standard part of property insurance.
"Both would be in jeopardy under Government's new proposals, which instead need to reflect today's world and the needs of modern businesses.
"Insurers want to continue to offer riot cover as a standard part of property insurance, but such drastic change could significantly impact on premiums, lead to the incorporation of excesses for riot into business insurance policies, or the exclusion of riot from insurance cover in certain areas."
Ministers want to put together draft legislation before the general election but there will be no new Act within the current Parliament.
The Government said previously that after the widespread disorder in the summer of 2011, "it became clear that the legislation governing riot compensation was outdated and of limited benefit to victims and to those handling claims".
The intention behind the reform is also to speed up the claims process so smaller businesses hit by riots can get back on their feet quickly.
A Home Office spokeswoman said: "Small and medium-sized businesses are at the heart of their communities and it is right that the Government supports them when they suffer unexpected loss or damages.
"The Riot Damages Act is over 125 years old and needs updating. Its purpose is to provide a safety net for businesses and individuals - our recent consultation provided an opportunity to ensure it meets the needs of any future compensation claims.
"Interested parties, including the Association of British Insurers, were invited to comment and provide data to inform the consultation.
"No final decisions have been taken on changes to the Act. We will now consider responses to the consultation and will decide which proposals to take forward in due course."