In the first-ever Lloyd’s City Risk Index, analyzes the economic output at risk (GDP at risk) in 301 major cities from 18 manmade and natural threats over a ten-year period.

It concludes that “$4.6 trillion of projected GDP is at risk from manmade and natural disasters in these cities around the world.”

Lloyd’s explained that it produced the index,based on original research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, with a goal of boosting the understanding of, and shape the world’s response to, the shifting risk landscape. It aims to stimulate additional talks between insurers, governments and businesses in order to reduce risk, protect infrastructure and boost resilience in the face of disasters.

Globally, the Index identifies three important emerging trends in the global risk landscape, which are listed as follows:

1. 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.
2. 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.
3. 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.

Lloyd’s said the findings reinforce the growing recognition that governments and businesses must “work together to build more resilient infrastructure and institutions. How quickly a city recovers after a catastrophe is a key component of the total risk, and the impact of events is mitigated by rapid access to capital to help restore the economy. ”

“Insurers, governments, businesses and communities need to think about how they can improve the resilience of infrastructure and institutions,” Lloyd’s CEO Inga Beale said in prepared remarks. Insurance is part of the solution [and] Insurers must continue to innovate; ensure their products are relevant in this rapidly changing risk landscape, offer customers the protection they need and, as a result, contribute to a more resilient international community.”

Professor Daniel Ralph, Academic Director of Cambridge Centre for Risk Studies, added in prepared remarks that the Lloyd’s City Risk index results are the culmination of six years of research at the Cambridge Centre for Risk Studies focused on catastrophic shocks on complex systems. The work, he said, combined a detailed understanding of 18 different economic threats to the world’s most important cities.

Source: Lloyd’s of London