Skip to Content

Blogs Spectator Money

From small beginnings grow multi-billion pound financial industries

4 July 2016

11:15 AM

4 July 2016

11:15 AM

Have you ever wondered what led to the birth of the modern insurance industry? No, me neither.

But it turns out that the Great Fire of London was the catalyst for what is today a multi-billion pound industry encompassing everything from contents, cars and caravans to pets, festivals and holidays. I admit to finding that interesting.

This year marks the 350th commemoration of the Great Fire of London, an event which started in a bakery on Pudding Lane and went on to devastate more than 13,500 homes and 87 churches, including St Paul’s. Estimated rebuilding costs were £10 million in the 17th century. The Association of British Insurers (ABI) calculates that repairing the damage caused by a blaze of that size in 2016 would cost insurers at least £37 billion –  the equivalent of building four Olympic Parks – although the actual figure could be much higher due to business interruption. According to Ecclesiastical Insurance, rebuilding St Paul’s cost £700,000 at the time, but this would top £600 million today.

As property insurance policies didn’t exist back in 1666, homeowners had no guarantee they would be able to rebuild their properties or replace their belongings. And so, as the flames licked London, many people dashed out to their gardens to bury valuables. Most famously, this included the renowned diarist Samuel Pepys.

On September 4, 1666, two days after the fire broke out, Pepys wrote in his diary: ‘Sir W. Batten not knowing how to remove his wine, did dig a pit in the garden, and laid it in there; and I took the opportunity of laying all the papers of my office that I could not otherwise dispose of. And in the evening Sir W. Pen and I did dig another, and put our wine in it; and I my Parmazan cheese, as well as my wine and some other things.’

Thankfully we no longer have to inter cheddar in the back garden at the first sign of trouble. Following the Great Fire, Nicholas Barbon launched the first fire insurance scheme in 1681. The fire also begat the London Fire Engine Establishment, an organisation run by several insurance companies, and lobbying from insurance companies and LFEE resulted in the establishment of the Metropolitan Fire Brigade in 1866.

James Dalton, director of general insurance policy at the ABI, said: ‘The Great Fire of London led to the modern insurance industry we know today. The damage of the fire was on an unprecedented scale and 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 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.’

Worrying about a second fire engulfing London may not be the most obvious reason to double check your home insurance policy is up to scratch, but it’s worth doing anyway.

Helen Nugent is Online Money Editor of The Spectator

Subscribe to The Spectator today for a quality of argument not found in any other publication. Get more Spectator for less – just £12 for 12 issues.

Show comments