Market calls for greater work with governments and businesses
Around $4.6tn of global gross domestic product (GDP) is at risk in cities from disasters in the next ten years, according to Lloyd’s.
Lloyd’s new report, the Lloyd’s City Risk Index, found three emerging trends in global risk:
- Emerging economies will shoulder two-thirds of risk related financial losses as a result of their accelerating economic growth, with their cities often highly exposed to single natural catastrophes.
- Manmade risks such as market crash, power outages and nuclear accidents are becoming increasingly significant, associated with almost half the total GDP at risk. A market crash is the greatest economic vulnerability – representing nearly a quarter of all cities’ potential losses.
- New or emerging risks, such as cyber attack, are also increasingly significant. Together, they account for more than a third of the total GDP at risk with just four – cyber attack, human pandemic, plant epidemic and solar storm – representing more than a fifth of the total GDP at risk.
The insurance market called on governments and businesses to work together to build more resilient infrastructure and institutions.
Lloyd’s noted that how quickly a city recovers after a catastrophe is a key component of the total risk.
It also said that the impact of disasters is cut by quick access to capital to help restore the economy.
Lloyd’s chief executive Inga Beale said: “Governments and businesses, together with insurers, must work together to ensure that this exposure – and the potential for losses – is reduced.
“Insurers, governments, businesses and communities need to think about how they can improve the resilience of infrastructure and institutions. Insurance is part of the solution.”
The report analyses the GDP at risk in 301 cities from 18 manmade and natural threats over a ten-year period.
The Lloyd’s index is based on research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School.