An insurance leader has released its latest research which shows that Australian cities have $81 billion in GDP at risk from both man-made and natural disasters.
Australia’s six top cities have an estimated $81.06 billion of GDP at risk from various threats, according to Lloyd’s.
The latest research, developed in partnership with Cambridge University’s Centre for Risk Studies, says that nearly 8% of the total GDP of the country is at risk from a series of man-made and natural disasters with a market crash placing almost half of the total at risk.
Manmade disasters account for over 70% of the total GDP risk exposure as Sydney ranks 19th globally for risk to market crash and 12th for cyber attack risk.
Alongside cyber risk in the emerging risk category, the country faces “significant potential losses from human pandemic,” Lloyd’s warn in the City Risk Index 2015-2025.While natural disasters often take up the bulk of the risk worries in AustraliaLloyd’s General Representative in Australia, Chris MacKinnon, said that manmade disasters should not be forgotten.
“The Lloyd’s City Risk Index highlights the economic risk exposure of our major Australian cities and the significant levels of GDP at risk that could come from these,” MacKinnon said.
“Whilst in Australia we are all too aware of the perils bushfire, flood or storm, we should be increasingly aware of a number of emerging threats highlighted in the report.
“Solar storms, human or plant pandemic or cyber terrorism are emerging threats which need to be considered and whilst the insurance industry continues to innovate with specialist insurance and reinsurance coverage, government, business and communities must work together to create a more resilient response to a major event.
Globally, the risk index identified three emerging trends that will be of particular importance for the international risk landscape.
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.”
Sydney features the biggest risk to its GDP of all Australian cities with Melbourne topping the pile with the largest economic impact from flood and Adelaide for earthquake.
MacKinnon noted that just a small increase in uptake of insurance could have a marked affect on the international risk landscape.
“Increasing insurance cover is an essential tool in mitigating risk and reducing the burden which often falls on governments and taxpayers to fill the gap,” MacKinnon continued.
“Lloyd’s research shows that a 1% rise in insurance penetration translates into a 13% reduction in uninsured losses – a 22% reduction in taxpayers’ contribution following a disaster.”
While the report found that Sydney had the most at risk of the six Australia cities researched, each city had more than $2 billion at risk.
1. Sydney($27.78 billion)
2. Melbourne ($22.98 billion)
3. Brisbane ($11.17 billion)
4. Perth ($10 billion)
5. Adelaide ($6.3 billion)
6. Canberra ($2.8 billion)