London, Moscow and Paris most exposed European cities to risk

London, Moscow and Paris are the most exposed European cities to a set of 22 risks, with a combined $24.6bn of annual GDP – or a third of Europe’s total losses – under threat, according to new research from Lloyd’s and the University of Cambridge. The Lloyd’s City Risk Index finds that market crash, cybercrime and floods are the top risks facing European cities, which account for only 13% of global GDP at risk, in part due to their relatively strong resilience. The index, produced by Lloyd’s and the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, compiles the impact of 22 risks into a single, annual measurement of economic loss. Globally, an estimated $546.5bn of GDP is at risk each year across leading cities, with man-made threats posing greater vulnerability than natural catastrophes. The new research also shows that Tokyo, New York and Manila have the highest exposure, and that boosting resilience would reduce annual GDP at risk in the 279 cities studied by £73bn. The research finds European cities stand to lose $70.3bn per year to risk. London has the most exposure of the 66 European cities studied, with $8.4bn under threat each year. It is the only European city to feature in the global top ten ranking, placing ninth. The top three worldwide cities at risk are Tokyo, New York and Manilla. Moscow is the second most exposed European city, with $6.3bn of GDP under threat, followed by Paris with $5.9bn. The most at-risk European cities are: London – $8.43bn Moscow – $6.27bn Paris – $5.94bn Madrid – $3.99bn Barcelona – $2.55bn Milan – $1.77bn Munich– $1.72bn Rome – $1.61bn Dublin – $1.49bn Athens – $1.48bn Globally, market crash is identified as the biggest threat to the cities’ economies, with an average $103.3bn of GDP at risk each year. Interstate conflict is second with $80bn and windstorm third on $62.6bn. Man-man threats are on the rise and account for 59%, or $320.1bn, of total GDP at risk. Natural catastrophes account for the remaining $226.4bn. Across Europe, the top risks are market crash with an exposure of $23.5bn, cybercrime with $9.4bn and flood with $9.3bn. The full top-ten list is as follows. Market crash – $23.51bn Cybercrime – $9.36bn Flood – $9.28bn Human pandemic – $6.86bn Commodity price shock – $4.75bn Sovereign default – $2.56bn Civil conflict – $2.37bn Solar storm – $2.13bn Interstate conflict – $1.81bn Drought – $1.39bn Europe’s role as a powerhouse of global trade means man-made risk stands to have the greatest impact on its cities. Man-made threats account for 67% of Europe’s total $70.3bn at risk. European cities generally perform well compared to those in other regions due, in part, to strong resilience. While Europe accounts for 13% of worldwide loss estimates, Asian cities stand to lose the most GDP to risk, accounting for $241.3bn or 44% of the global total. North American cities can expect to lose $93bn each year, or 17% of the annual total. Cities in the Middle East and Africa stand to lose $97.2bn of their GDP in total, which equates to 18% of the global figure. Latin American cities make up 8% of the global total at risk on $44.7bn. Of the 36 global cities graded as having “very strong” resilience, half are in Europe. However, just two – Prague and Ljubljana – are in eastern Europe. Only one European city, Kiev, sits in the lowest resilience category. But in total 11 eastern European cities are categorised as having weak resilience, including all Russian cities in the index and Sarajevo. Currently, 27% of European cities are classified as having very strong resilience, 45% strong, 9% moderate, 17% weak and 2% very weak. In general, Europe has stronger controls in place to mitigate its risks and is well insured. However, if every European city maximised its resilience rank, the continent could save just over $2.6bn per year. Almost 90% of this sum would be achieved by improving the resilience of eastern European cities. The research explains that the risk profiles of London and Paris are markedly different to Moscow, reflecting a sharp divergence between the exposure of western and eastern European economies. Eastern European cities are, in general, more exposed to geopolitical and security risks and less exposed to market crash and cybercrime. The 40 western European cities have expected total GDP loss of $54.5bn. The key risks are market crash ($17.38bn), cyberattack ($8.67bn), flood ($8.54bn), human pandemic ($5.56bn) and commodity price shock ($4.40bn). This reflects the region’s emphasis on trade rather than resource. The 26 eastern European cities face an expected loss of $15.85bn. The five costliest individual risks are market crash ($6.13bn), civil conflict ($2.05bn), sovereign default ($1.54bn), human pandemic ($1.29bn) and interstate conflict ($877m). According to the index, the top three western cities at risk – London, Paris and Madrid – share similar risk profiles. London stands to lose more simply because of its greater size and GDP. Market crash is the biggest risk in these major financial centres, in common with practically all western European cities. The three cities in western Europe that stand to lose most from this threat include two from Spain, with Madrid in first place and Barcelona third. London’s climate has the potential to cause substantial financial loss. It is the second most exposed city worldwide, in financial terms, to drought, after Los Angeles. Solar storm is the final area where London ranks very highly, in third place globally. The index indicates that London, and other cities in northern latitudes – primarily Moscow, Dublin and those in Scandinavia – are justified in efforts to better protect their power grids from this threat. The index estimates an annual cost to Paris’s GDP from flood at $1.16bn, putting it in seventh place globally. Paris is in second position worldwide for heatwave risk. Moscow is the 16th most at-risk city globally, primarily due to its exposure to man-made risks. Less than a billion of its $6.3bn exposure is due to natural causes. Moscow is the most exposed city to market crash in Europe. Sovereign default is a major risk for several cities in eastern Europe, including Moscow which sits in third place globally from this threat with $789m of GDP at risk each year. Moscow has $989m at risk to civil conflict. Six of the top ten European cities that stand to lose most from this peril are Russian. The Lloyd’s City Risk Index also warns that many European cities are exposed to paradoxical climate extremes. Freeze and heatwave account for $1.21bn of GDP at risk, while flood and drought stand at $10.7bn. Managing water in the face of a changing climate should be a priority for Europe’s city planners, says a report on the index findings.

London, Moscow and Paris most exposed European cities to risk

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