Farms and other businesses are being warned that more comprehensive insurance cover and contingency planning is needed to deal with losses as a result of the latest foot and mouth outbreak.

Law firm Reynolds Porter Chamberlain warned that farms and other businesses are unlikely to have insurance to cover the losses their businesses may suffer as a result of the outbreak.

Stuart White, partner at RPC said: “As the government provides compensation for culled livestock the demand for foot and mouth disease insurance has been low. However, foot and mouth creates other losses, other than culled livestock, which are highly unlikely to be insured, or picked up by the government.”

“Standard business interruption insurance is likely to be of little assistance in this case as it will normally depend on the policyholder suffering physical damage. Many firms, which are dependent on farmers producing meat, will have had their businesses interrupted but they will have suffered no physical damage, just financial losses.”

White said that unlike some other industries, the agricultural sector had not developed the “taste” for the kind of insurance products needed to cope with rare but far reaching catastrophic events such as foot and mouth.

The ban on movement of livestock across Britain is already hurting farmers and other businesses across tourism and leisure industries, said RPC. And if not contained quickly, the effects could also be felt not only by those in the food processing chain but also by the tourism and leisure industries.

The 2001 foot and mouth outbreak resulted in £3bn worth of direct costs to agriculture and £5bn worth of indirect costs to other sectors.