Thousands of passengers had their flights cancelled or altered in mid-air after a massive fire ripped through an electricity substation near Heathrow airport on March 20, forcing the airport to close for more than 15 hours. The fire caused significant disruption, not just to air travel but also to businesses dependent on the smooth functioning of the airport and its infrastructure.
"At a time where economic growth is already under pressure, unexpected disruptions to the flow of goods and people will be particularly unwelcome news for the UK government,” said Derren Nathan, head of equity research at Hargreaves Lansdown.
For businesses facing such crises, Matt Briggs, UK technical director of commercial property underwriting at AXA, believes brokers must step in to help mitigate financial losses and ensure companies are well-protected.
Briggs emphasised that brokers need to be proactive in helping businesses prepare for these kinds of disruptions. "The customer may have a disaster recovery/business continuity plan in place, but ideally, these should be regularly updated and rehearsed," he said. Businesses should review their contingency plans and consider practical measures to mitigate losses, such as enabling remote work, adjusting supply chains, or finding alternative production methods.
Additionally, brokers need to ensure that businesses in high-risk environments are adequately covered.
One of the most critical forms of coverage to consider is business interruption insurance.
“Most customers will have material damage cover should their premises be impacted by a fire or other serious incident,” Briggs noted. “However, business interruption cover is equally important. Many SMEs don’t buy this cover, and we would encourage customers to consider investing in the protection it provides.”
In particular, there are several business interruption extensions brokers may wish to recommend, such as coverage for the failure of public supply (including electricity). This extension provides protection against the loss of power after just a few hours of interruption.
Briggs also highlights the importance of other coverages that help mitigate financial loss during disruptions. “Denial of access cover is important. Following a major incident, the premises may be inaccessible for customers, suppliers, and staff. This cover will provide some financial protection for loss of revenue/profit,” he said. “Finally, for longer outages, loss of attraction cover may be relevant. For example, if retailers notice a drop in footfall because of damage to key buildings or infrastructure nearby, they may be able to claim for the loss of business."
In sectors like aviation and logistics, disaster recovery plans are often in place at major airports. However, businesses that rely on these airports - such as suppliers, airlines, and local retailers - will need additional support to safeguard operations.
"Major airports will have a disaster recovery plan to get operations up and running as soon as possible,” said Briggs. “But businesses impacted by these disruptions should focus on their own operations and ensure they have the right insurance protection in place to minimise losses."
For brokers, it's important to understand the claims process after an event like the Heathrow fire. According to MorningStar DBRS, “For travel insurance providers, this high-profile, large-scale disruption will have significant but manageable financial and operational implications.”
In terms of business claims, the process may be more limited if the core infrastructure, like the airport itself, wasn't directly affected. “The airport itself wasn’t damaged, so eligible claims are likely to come from business interruption extensions,” Briggs explained. Given the fire broke out at midnight and lasted for 18 hours, the financial impact from an insurance perspective could be less significant than expected.
