The fire and riot at the Yarl's Wood detention centre in February has left the UK's private prisons unable to extend insurance contracts.
This could leave them in a position where they are forced to close; prison contractors are legally obliged to insure their facilities.
A government spokesman said several of the UK's nine privately-managed prisons were shortly to renew their insurance contracts, but the Yarl's Wood incident had left insurers reluctant to provide cover for material damage, except at very high premiums.
Rioting asylum seekers caused an estimated £100m of damage at Yarl's Wood.
"It's not all insurance, just insurance specifically related to a major incident that causes significant damage," the spokesman said.
Heath Lambert director Richard Worker said underwriters had to note the significant differences between prisons and detention centres, both in terms of construction and levels of security. "There is capacity for prisons... But underwriters are still going through the pain of re-addressing their book."
