How the Great Fire of London kindled the home insurance industry
350 years ago today, the Great Fire of London’s flames began spreading from Pudding Lane, culminating in a four-day blaze that ravaged the City of London, forever changing its landscape.
The inferno lead to tens of thousands of people being displaced from their homes, but for all the chaos there were surprisingly few fatalities, with just six people reportedly killed by the flames - though doubtlessly there were victims forgotten by history.
Yet the knock-on effects were far-ranging, not only leading to large areas of the capital being rebuilt, such as Sir Christopher Wren’s reimagining of St Paul’s Cathedral, but also to the birth of the UK’s entire insurance industry, which would soon become the world’s largest.
In 1666, the City of London was an accident waiting to happen, which had been pointed out by King Charles II just a year earlier. Wooden houses and thatched roofs were commonplace in the Square Mile at the time, despite their being illegal. The street layout was as higgledy-piggledy as it is now (despite the blank slate afforded by the fire, those responsible for rebuilding the city chose to keep its existing street layout) and the industries of the day increased the threat level to white hot. Paper, wood, hemp, tar and even gunpowder were commonly traded on the streets.
And when fires did break out in the capital there was no official Fire Brigade service to speak of, though a voluntary Neighbourhood Watch style scheme did provide a reasonable layer of protection. A thousand-odd people patrolled the city to deter troublemakers and fight fires, which were frequent if rarely catastrophic. While the fire of Pudding Lane did kindle the UK’s (and the world’s) insurance industry, London’s Fire Brigade would not be formed for another 200 years.
These public-spirited amateur anti-arsonists used unconventional techniques by today’s standards. While water was a key tool, the other was gunpowder, used to flatten neighbouring buildings to starve the flames of fuel to spread further.
Through the diaries of Samuel Pepys, the Zoella of his day and notorious cheese-hoarder, we now know that flames spread over London Bridge (hence its falling down, according to some), leaving even more people homeless. Thankfully, the fire was prevented from expanding into South London as an earlier fire in the 1630s had inadvertently created an effective firebreak.
At the time, almost all of the victims of the fire weren’t insured, leaving individuals on the hook for £10 million in damages – a colossal amount of money compared to the City’s estimated £12,000 gross domestic product (GDP - the monetary value of the goods and services produced) at the time.
This led to Sir Wren suggesting an Insurance Office in his plans for rebuilding the city a year later, though the idea wasn’t initially taken up. Nonetheless, over the next 40 years the UK’s insurance grew rapidly, with policies initially bought and sold in London’s coffee houses, as is the story with many of our early financial services industries.
Most famously, Lloyd's of London, a marketplace for people looking to insure mainly maritime ventures came into being in the 1680s, and by the turn of the century other mutually-owned insurers were roaring, with companies such as the Phoenix Life Office, the Friendly Society and the Hand-in-Hand Office offering peace of mind to homeowners.
Incidentally, the rise of insurance in America arrived at a similar time, though the first policies weren’t sold until 1732. One famous pioneer of the industry was Benjamin Franklin, who was presumably taking a break from inventing bifocal glasses, a postal service, furthering our understanding of electricity, and helping to create the US Constitution.
Franklin wasn’t the first to offer home insurance, but his insurance firm created the first fire service – in contract to the UK, where our fire brigade was created by the state. These early US fire engines would only put out a fire if the home was insured – or if the blaze threatened the home of a neighbour who had a policy.
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London’s burning – the area affected by the Great Fire of London