The new calculation has been published with only two months until the 350th commemoration of the Great Fire of London on the 2nd September. This is widely considered to have led to the birth of the modern insurance industry.
To mark the 350th commemoration, the Association of British Insurers (ABI) have also launched a timeline about the Great Fire of London showing how this event led to the creation of the property insurance market we know today.
The fire, which started in a bakery on Pudding Lane, devastated over 13,500 homes and 87 churches, including St Paul’s. As property insurance policies didn’t exist at this time, homeowners had no guarantee that they would be able to rebuild their properties or replace their belongings. This led to many people, including the famous Samuel Pepys, running to their gardens to bury valuables such as cheese and wine.
Re-building costs today of the Great Fire of London
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Estimated costs were £10** million in the 17th century. The ABI calculates this would cost £36 billion today, although the actual figure could be much higher due to the costs of business interruption.
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At the time, re-building St Paul’s cost £700,000; this would cost around £600*** million today. (Source: Ecclesiastical Insurance)
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 £37bn 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."
Key milestones in the history of insurance
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Nicholas Barbon launched the first fire insurance scheme in 1681. The scheme entered into around 10,000 policies, until it was dissolved around the year 1710.
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The Great Fire of London led to the creation of the London Fire Engine Establishment (LFEE), an organisation run by several insurance companies.
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Lobbying from insurance companies and LFEE led to the creation of the Metropolitan Fire Brigade in 1866.
*The ABI has calculated this 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 comes to just under £34bn and the second component to just over £3bn which has totalled £37bn.
***The estimated cost to re-build St Paul’s Cathedral was calculated by specialist insurer, Ecclesiastical’s Principal Risk Management Surveyor, Bob Johnson
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