Repairing the damage caused by a fire the size of the Great Fire of London today would cost insurers at least 37 billion pounds (or $70 billion)*, the Association of British Insurers (ABI) has estimated.
The calculation has been released to mark the 350th
commemoration of the Great Fire of London on 2 September, with the event is widely considered to have sparked the birth of the modern insurance industry.
The fire, which started in a bakery on Pudding Lane in 1666, wiped out over 13,500 homes and 87 churches, including St Paul’s cathedral.
As property insurance policies didn’t exist at this time, homeowners had no guarantee they would be able to rebuild their properties or replace their belongings. This led to many people, including the famous diarist Samuel Pepys, burying valuables such as cheese and wine in their gardens.
The estimated costs were 10 million pounds in the 17th
century, with the ABI calculating this to cost to be 37 billion pounds today, although due to the costs of business interruption that figure could be even higher, the ABI said.
St Paul’s cost 700,000 pounds to re-build at the time which, according to Ecclesiastical Insurance’s principal risk management surveyor, Bob Johnson, would cost around 600 million pounds today.
, director of general insurance policy at ABI, and ex-NZ Treasury lawyer and policy adviser at MBIE, said the damage from the Great Fire was on an unprecedented scale.
“It is difficult to imagine now that no insurance policies were in place for any of the damage caused.
“As unlikely as it is, if such a fire was to take hold today the cost would be enormous, a 37 billion pound rebuilding cost.
“At least we know that those who would be affected would have the safety net of an insurance industry ready to help them in their time of need.”
The association said other key milestones in the history of insurance that evolved from the event included:
- Nicholas Barbon launched the first fire insurance scheme in 1681.
- The Great Fire of London led to the creation of the London Fire Engine Establishment (LFEE), an organisation run by several insurance companies.
- Lobbying from insurance companies and LFEE led to the creation of the Metropolitan Fire Bridade in 1866.
The ABI has also produced a timeline
of how the fallout from the event led to the creation of the property insurance market we know today.
*The ABI calculated the 37 billion pound figure based on an estimated number of buildings within the affected area and an estimation of the proportion of commercial space and retail space. By setting an average number of floors to building types, metres squared per floor and a relationship between rent costs and building costs per metre squared, the ABI calculated the total rebuilding cost. The ABI added rebuilding costs of the City’s skyscrapers updated to today’s prices. The first component came to just under 34 billion pounds and the second component to just over 3 billion pounds, totalling 37 billion pounds.
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