Aviation and travel insurers will be hit by the cost of several days of flight cancellations, Mr. Woo noted.

Floods from the melting glaciers will likely cause river levels to rise and potentially cause damage, RMS said, citing Iceland's Department of Civil Protection and Emergency Management.

The ash cloud affect, said Bill McGuire from the Aon Benfield UCL Hazard Research Centre, can cause major damage to aircraft by clogging engines and causing them to flame out, and by scouring windscreens so as to make them opaque.

He said Scottish and northern airports are closed.

Elsewhere in the UK, RMS said, Heathrow, Gatwick, Stansted, London City, Aberdeen, Edinburgh and Glasgow airports were shut, with severe disruptions to services reported to flights in and out of Manchester, Newcastle and Birmingham airports. British Airways cancelled all domestic services today as well.

RMS said problems have also been reported at East Midlands, Leeds Bradford, Cardiff and Bristol airports.

Norway's aviation authority, ANIVOR, closed the northern half of the country's airspace late yesterday evening, RMS said.

The United States Federal Aviation Administration has reported delays in flights leaving the U.S., with flights that were due to cross Icelandic airspace grounded, RMS said.

Mr. McGuire said the last eruption from this volcano lasted more than 12 months, so if this eruption has a similar duration, the ash could periodically present a problem to U.K. air space.

Mr. Woo said the volcano is close by the Katla volcano, and there is a heightened risk of the activity spreading within the regional volcanic system. "Katla is the second most active volcano in Iceland, and is notorious for its violent eruptions, with colossal glacial floods far exceeding that just witnessed," he said, "As a consequence, direct insurance losses could potentially rise substantially over the coming months."

Willis Research Network (WRN), which is funded by Willis Group Holdings, said the industry currently has no detailed insurance risk models for volcanoes in Europe and various European overseas territories.