C L I M A T EH OC TH ATNO GP EI C: P–R MO PO ET RO TRY R I S K S
THE 10 CITIES WITH THE HIGHEST GDP@RISK TOGETHER FACE $126.8BN IN POTENTIAL LOSSES TO ECONOMIC OUTPUT EACH YEAR. THIS IS ALMOST A QUARTER OF GLOBAL GDP@RISK AND MORE THAN THE AMOUNT OF GDP@RISK IN AFRICA, THE MIDDLE EAST AND LATIN AMERICA COMBINED. 29 The Lloyd’s City Risk Index, in collaboration with the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, measures the impact of 22 threats on 279 cities’ projected economic output, including those associated with climate change, such as drought, flood, extreme cold and hot weather. The 2018 index, published this June, reveals that 279 cities across the world – the key engines of global economic growth with a combined gross domestic product (GDP) of $35.4trn – risk losing on average $546.5bn in economic output annually (termed ‘GDP@Risk’) from all 22 threats. Climate-related risks together account for $123.0bn of GDP@ Risk and this sum is expected to grow as extreme weather events become increasingly frequent and severe. The costliest climate events are windstorms, which account for $66.3bn of GDP@Risk and flood that puts a further $42.9bn of economic output at risk.
INVESTING IN RESILIENCE Lloyd’s chairman Bruce CarnegieBrown says: “No city will ever be completely risk-free. The index shows that investing in resilience – from physical flood defences to digital firewalls and enhanced cybersecurity, combined with insurance – will help significantly reduce the impact of extreme events on cities, improve economic stability and enhance prosperity.” Professor Daniel Ralph, academic director of the Cambridge Centre for Risk Studies, at the University of Cambridge Judge Business School, points to “the worldwide rise in geopolitical risk, driven in large part by the threat of interstate conflict and civil unrest”, adding: “We are likely to see this trend continue on a global level.” This is also a risk that the experts fear will rise as climate changes impact society. Closer to home, one of the debates that raged this winter in the UK was whether the so-called ‘Beast from the
East’ could be a sign of things to come. If so, that could herald bad news for property insurers. The Association of British Insurers reports that in the first quarter of 2018: • In total, £1.25bn was paid by insurers under domestic and commercial property insurance policies – the highest quarterly figure for two years • Insurance payouts to homeowners and businesses for storm, flood and burst pipe damage jumped to £361m, a massive 290% rise on the £93m paid in the previous quarter; some 86,000 claims were handled, compared to 29,000 in the previous quarter • £194m was paid to help homeowners cope with the misery of burst pipes; this was the highest amount ever paid in a single quarter and compared to only £4m paid out in Q4 2017 • On commercial insurance, weather damage and escape of water claims also rose, up to £188m, compared to £107m the previous quarter. →
thejournal.cii.co.uk / The Journal / June - July 2018
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