Yarls Wood debacle leaves PFIs in doubt

4 Apr 02
Private sector firms could be discouraged from bidding for future detention centre contracts in the wake of this week's Yarl's Wood insurance debacle, according to the underwriter involved.

05 April 2002

David Pye, active underwriter at the Lloyd's syndicate dealing with the troubled asylum seekers' site in Bedfordshire, told Public Finance that the Home Office's Private Finance Initiative had transferred 'potentially unmanageable risks' to the private sector.

Pye said that insurers were concerned over security at detention centres, as well as the conditions in which detainees are held, because they could exacerbate asylum seekers' antagonisms and lead to further incidents.

'Insurance for detention centre contracts is going to become more difficult and more expensive as a consequence of Yarl's Wood. Where there is little control over the people held in these centres, the regime or the staffing levels, then insurers will be very sceptical,' he added.

Calls for the management of refugee centres to return to government hands increased after Yarl's Wood, which was badly damaged following a fire on 14 February, was closed temporarily on 31 March – just hours before the current insurance policy expired.

Yarl's Wood remains closed because insurers have failed to provide Group 4, the firm responsible for managing the site, with a suitable new policy.

The local police force already faces a £43m claim from insurers under the Riot Damages Act, and the Home Office, which is negotiating the responsibility for liabilities with the contractor, faces a potentially huge bill to cover part of the costs involved.

Current PFI contracts stipulate that private contractors must insure buildings, but Pye said that private companies may have little appetite for detention centre deals unless the government assumed more of the risk.

The government has a policy of not insuring Crown property and would be required to pay for damages from the public purse should full responsibility for detention centres shift back to the Home Office.

The Home Office refused to comment on its negotiations with Group 4, but said that Yarl's Wood would reopen 'as soon as possible'.


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