Child Abuse: The End For Big Insurers

When Municipal Mutual threatened Clwyd Council, and threatened to cancel the authority's cover, Municial was already in a highly vulnerable financial state.

In 1994 the Local Government Chronicle reported that following a 'scheme of arrangement' - in the hands of receivers might be a better term - Municipal faced "future claims of £925m compared with assets of £45m."

Hardly surprising that the company was on edge at the idea of an expanding child abuse enquiry.

The email which arrived at the UK Column was to the point: "read the Independent article dated 9 June 1996 for more information on insurance companies and child abuse."

The email had been sent following my tweet the previous day: "Tweeting for truth ... told Zurich insurance is pushing to close down child abuse investigations ... is this true? Their risk so high = possible collapse". 

I read the Independent article with increasing astonishment. Following a blunt headline it then stated:

Take these facts: probably more than 100, possibly more than 200 children were sexually abused in the children's homes of one county council. At least 12 of them, perhaps as many as 16, are now dead, some by suicide. Prominent public figures were persistently rumoured to be among the abusers, members of a paedophile ring to whom the children were supplied as sexual playthings.

Referring to the Clwyd abuse, the Independent stated that:

[the abuse] continued, in an organised manner, for 10 years and more, making this council's homes a "gulag archipelago" of misery for the hapless children exiled into them; but the council itself, and the social work inspectorate, and the relevant government department, and the local police, all failed to stop it for a decade...It is almost certainly Britain's biggest child-abuse scandal, but you are probably not aware of it. This is a scandal the full scale of which simply has not penetrated the national consciousness.

The Independent covered not only the abuse of children but deaths and suicides, and the deliberate cover-up of that abuse. The article had both purpose and passion. In fact the Independent discovered that before the so called Jillings report surfaced, a previous 13 investigation reports into child abuse by the Council had never been published.

For those asking the obvious, critical and common sense question, why were the reports pulled? The Independent gives the answer with startling clarity.  Clwyd County Council was bullied and pressurised by their insurers Municipal Mutual who are described as hostile to the [child abuse] inquiry from the start fearing it might provoke a flood of compensation claims. 

Fearing those substantial claims Municipal Mutual wrote a number of letters. "We do not see why it is necessary to have such a wide-ranging inquiry," says one letter from the insurers quoted in the report. Other comments were similarly "blunt and callous."

As the Independent stated:

according to the report, the insurers or their solicitors also successfully opposed plans by the inquiry team to look for other children who may have been abused. They warned that public dispute between the council and the North Wales Police was unacceptable, and suggested that the Chairman of the Council's Social Services Committee, Malcolm King, should be sacked if he wanted to speak out, writing: 'Draconian as it may seem, you may have to consider with the elected members whether they wish to remove him from office if he insists on having the freedom to speak.'

Why were Municipal Mutual going for Malcolm King? Simply because he had the courage to speak out. "The evidence emerging is that they were a gulag archipelago stretching across Britain - wonderful places for paedophiles, but for the children who suffered, places of unending nightmares," he said.

So Mr King was warning not just that abuse of children had taken place on a significant scale within the County, he also either knew or suspected that the pattern was repeated across UK. The simple conclusion is that his feared UK wide abuse on the Clwyd scale affecting thousands of children, if not tens of thousands. 

Few of us, from backgrounds of safe loving homes, can possibly imagine the pain and horror of being abused in the State 'care' system. We can get some way by talking to survivors, but even then we only receive the knowledge separated from the physical act of the abuse itself.

Raped, sodomised, beaten, often drugged, threatened, bullied, and passed around like playthings, the damage to children and teenagers is immense. Yet that is only the beginning, because the damage continues through adult life in the form of shame, terrifying flash-backs, depression and mental problems, relationship problems and the associated compounding life-wrecking caused by self medication through drugs and alcohol.  

In the press and media recently it was reported that Nottingham City Council had paid out a total of £250,000 to 26 abuse survivors - less than £10,000 per survivor. Here we reach the heart of the matter. These payouts came not from the Council but from their insurers.

Yet what compensation is approproate and proportionate for child abuse survivors from guilty councils such as Clwyd? Imagine you had experienced such abuse - what figure would you place on your destroyed life? £1million, £2million, more? Keep in mind the continuing support required as you consider this question.

Abuse victims coming forward in the Nottingham area such as Melanie Shaw and Micky Summers have exposed major child abuse. Even with the police investigation running - Operation Daybreak - it is hard to assess the total number of children's homes involved or the number of victims. Several hundred children is a conservative estimate.

Recognising that a £10,000 payment for horrific abuse and a lifetime of suffering is a gross insult, and using our own suggestion that just £1 million is a more reasonable figure, 500 child abuse survivors equate to £0.5 billion.

Consider Mr Kings assessment of a UK wide child abuse gulag, the figure becomes vast - 5,000 children equates to £5billion.

Take the abuse over ten, twenty or more years and the number of children and the insurance risk climbs dramatically, to levels capable of undermining or bringing down even the biggest firms. No wonder insurance companies are so scared that they are warning off Councils and suppressing child abuse investigations.

In the 3 September 2015 report by the Municipal Mutual 'Scheme Administrator, Gareth Hughes, he bemoans the results for the year stating:

The loss of £38.4m for the year, which in combination with prior losses results in a balance sheet deficit of £114.6m as at 30 June 2015, is very disappointing. It is primarily due to further worsening in the estimated costs of future mesothelioma [asbestos cancer] and abuse [child] claims projected by the Company's actuarial advisors KPMG LLP.

This 'taster' of the risk of big money abuse claims is dramatically reinforced by a statement in the report headed 'Claims Volatility':

The Employers liability claims for mesothelioma have shown a continuing worsening trend over the past few years and there continues to be much uncertainty regarding the eventual outcome. In addition, the Company has experienced a significant increase in historical child abuse claims over the past year. Claims for child abuse will undoubtedly be affected by the growing public awareness following the publicity surrounding the activities of Jimmy Savile and other high profile individuals together with the growing number of public body and police investigations. The Company anticipates claims will arise from the Independent Inquiry into Child Sexual Abuse established by the Home Secretary but the extent is, as yet, impossible to predict with any degree of certainty.

The report also states that "the Company has received assurances from third parties, in particular Zurich Insurance and Aviva, that appropriate recovery plans are in existence in the event of unforeseen interruptions to the services which are provided to the company."

So insurance giant Zurich, to name just one, is deeply connected to the child abuse issue and the subject of allegations that they are also advising Councils on child abuse pay-outs.

So how big is the potential child abuse compensation risk? Try starting with 5,000 children abused each year for 30 years and each to receive just £1million. A massive £150 billion - enough to make Lloyds of London wince. Personally I believe that the number of children abused each year is much higher. 

Let's not forget however that compensation within a Civil Claim is not enough. Child abuse is a very serious criminal offence.

To fail to report a crime is itself a crime. To assist a crime by hiding it, is certainly a crime. To protect the financial viability of a company, however big, by supressing crime is also a crime. Those commiting crime must be tried and the guilty punished. That is the law.

There can be no doubt that the police are failing to investigate the crime of child abuse and they are comitting a crime by doing so. Did the police ever investigate Municipal Mutual for attempting to suppress the exposure of crime? I doubt it.

It is time that the victims of child abuse see justice by their abusers being brought to justice. If policemen go to prison as a result, along with the fat cat bosses of insurance companies and corporations, then the sooner the better.