World’s riskiest cities

Earthquakes, Tsunamis, Cyclones and Typhoons, Health and Safety, Marine Insurance, People and Places, Safety and Security — By on October 17, 2013 at 7:46 PM
Tokyo, Japan moments after the devastating eartquake

Tokyo, Japan moments after the devastating eartquake

Tokyo tops the list of cities most at risk of natural catastrophes, according to new research that compares exposures of cities around the world. (Source; Lloyd’s of London)

The world’s most exposed urban area is the Tokyo-Yokohama region where Swiss Re estimates around 29 million people could be affected by a major earthquake. The reinsurance company has released new research and a risk index that compares the human and economic exposure of 616 cities around the world.

The Japanese metropolis also has potential for significant economic losses from earthquakes, according to the research. Tohoku – the strongest earthquake ever recorded in Japan – cost around $210m in economic losses.

“The Tohoku earthquake in 2011, Thai floods in 2011 and Hurricane Sandy in 2012 were reminders of the vulnerability of cities to natural catastrophes, ” says Swiss Re’s head of natural hazards Andreas Schraft.

One reason for this vulnerability is the high population densities in urban areas, with a quarter of the world’s population living in cities, thinks Schraft. At the same time many urban areas are exposed to multiple natural hazards such as earthquake, windstorm and flooding.

Abnormal the new normal – particularly in Asia

The study found that coastal cities in Asia are especially at risk of catastrophic floods, storms, storm surges, earthquakes and tsunamis.

“A lot of cities – particularly in Asia – are located in natural hazard zones, ” says Lloyd’s manager of emerging risks and research Neil Smith. “This is often an evolution of history with urban centres growing up in ports, on the seaside or in river deltas, which are often naturally more exposed to some of the extremes of weather.”

“More and more people are living in cities as urbanisation is increasing – and then there is population growth on top of that – which means more concentration of assets and critical infrastructure, ” he continues. “The overall trends are for rising property and asset values in most cities.”

“At Lloyd’s, we’re seeing more severe and frequent weather events, ” concludes Smith. “Add all that up and that’s why the exposure is increasing and is obviously of concern.”

Despite 2011 being the costliest year for catastrophes, 2012 exceeded it in terms of the number of people displaced, according to Swiss Re Sigma. Over 32 million people were left homeless by disasters in 2012, double the number in 2011. This included 212, 000 displaced by monsoon flooding in North Korea and 3.5 million in China forced to leave their homes by storms and typhoons.

Awareness of the threat that natural hazard risks such as flooding, windstorms and drought pose to business is growing, according to Lloyd’s Risk Index 2013. A quarter of respondents felt the impact was greater in 2013 as it was two years before, with the risk felt most keenly by risk managers in Asia-Pacific.

Mitigation and insurance

In Swiss Re’s ranking of which urban areas would likely experience the biggest economic impact from a disaster (measured by the number of working days lost), three US cities – Los Angeles, New York and San Francisco – were in the top ten.

The report showed that while a devastating earthquake in LA could affect as many people as in Jakarta, the resulting value of working days lost would be roughly 25 times higher.

On 29th October last year Superstorm Sandy made landfall five miles southwest of Atlantic City, New Jersey. The massive storm – which had tropical storm-force winds extending 950 miles across – brought a record surge to New York’s Manhattan Island according to the cat modelling agencies, inundating many low lying areas, tunnels and subways and bringing the city to an effective halt. Economic losses are estimated at around $70bn, according to Swiss Re.

“We should be building within our landscape and not trying to build around it, working within our environment and promoting ecosystem development such as sand dunes and wetlands in areas exposed to coastal and river flood, ” adds Megan Linkin, senior natural expert at Swiss Re.

“And we should definitely be prepared financially, ” she continues. “Not only urging residents to make sure they are financially prepared but making sure that cities also realise the public private partnerships that are being developed so that they can protect themselves financially and reduce their budget volatility from year to year in the event of a natural disaster.”

Schraft said corporate risk managers might want to use the data of city exposures to consider where buildings, factories and offices are located. “If [their business] is in an urban area exposed to natural hazard they may consider protecting themselves or if they want to expand their operations, moving into areas that are not exposed to natural hazards may be a solution.”

Societies must strengthen the resilience of urban areas, thinks Schraft. “Cities should be reinforcing and strengthening buildings, not concentrating highly vulnerable assets in the basement or ground floors but higher up in the buildings, that could go a long way to mitigating the risk, ” he says.

An initiative led by the Rockefeller Foundation and shared by Swiss Re, the American Institute of Architects, Architecture for Humanity and analytics company Palantir aims to help 100 cities improve their resilience. This will include hiring chief resilience officers and providing access to tools, technical support and resources to help improve and strengthen infrastructure.

“Lloyd’s has been managing natural catastrophe risk for decades, so in addition to providing insurance policies we can provide risk management and mitigation expertise and advice, ” adds Smith. “It’s in our interest to reduce the risk and reduce the number of claims for those who do have insurance.”

“And we can work collaboratively with governments, ” he adds. “Education is key in raising awareness of the role of insurance and we can work with governments to do that – which is particularly important in countries where insurance penetration is low.

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