Lloyd’s City Risk Index · Europe is particularly vulnerable due its geographic location. Europe experienced heatwaves in 2003, 2006, 2007, 2010, 2014 and 20152. The freeze in March

Lloyd’s City Risk IndexEurope

Lloyd’s City Risk Index. Europe

Overview

1 Cities 12

2 Threats 18

3 Resilience 30

References 33

Acknowledgements 34

Lloyd’s City Risk IndexEurope

Lloyd’s City Risk Index 279 cities. 22 threats $546.5bn at risk

The Lloyd’s City Risk Index measures the GDP@Risk of 279 cities across the world from 22 threats in five categories: finance, economics and trade; geopolitics and security; health and humanity; natural catastrophe and climate and technology and space. The cities in the index are some of the world’s leading cities, which together generate 41% of global GDP.

The index shows how much economic output (GDP) a city would lose annually as a consequence of various types of rare risk events that might only take place once every few years, such as an earthquake, or from more frequently occurring events such as cyber attacks.

GDP@Risk is an expected loss figure – in other words it is a projection based on the likelihood of the loss of economic output from the threat. The resilience levels of each city are taken into account, including the city’s governance, social coherence, access to capital and the state of its infrastructure. If some or all of these are resilient they can reduce the overall expected loss.

One way of thinking about GDP@Risk is as the money a prudent city needs to put aside each year to cover the cost of risk events. The concept of GDP@Risk helps policymakers, businesses and societies understand the financial impact of risk in their cities, a first step to building greater resilience.

The index also shows the scenario costs – these are the one-off costs if a specified threat scenario takes place. The index shows two numbers: the lower total is the loss that would occur from a moderate-sized event of that threat category; the higher total is the loss from an extreme scenario. These numbers represent the amount of lost economic output from the city from these types of scenarios. If occupants of the city hold insurance that covers property damage and business interruption, then some of the economic losses would be compensated from claims payments on these policies.

Global overview 279 cities. 22 threats

The index’s key finding is that $546.50bn is at risk each year from all 22 threats, in all 279 cities. The largest threats globally 1 are: market crash ($103.33bn), interstate conflict ($80.00) and tropical windstorm ($62.58bn). Man-made threats account for 59% of the total GDP@Risk and climate-related risks account for $122.98bn of lost GDP – a sum that will grow as extreme events increase in frequency and severity.

The three cities which stand to lose the most GDP through risk worldwide are Tokyo ($24.31bn), New York ($14.83bn) and Manila ($13.27bn). The ten cities with the highest exposure could together lose $126.82bn per annum, almost a quarter of the total GDP@Risk in the index, with Tokyo standing to lose more than any other city.

Asian cities stand to lose the most GDP to risk, accounting for $241.28bn or 44% of the global total, with tropical storm the costliest single risk at $59.14bn. North American cities can expect to lose $92.96bn each year and European cities, $70.33bn. In both regions, market crash is the single costliest risk. Cities in the Middle East and Africa will lose $97.20bn of their GDP, with interstate conflict the costliest risk. Latin American cities make up less than 10% of the global total with $44.73bn of GDP@Risk.

The index ranks each city with a resilience score from “very strong” to “very weak”. A higher resilience score reduces the GDP@Risk. If every city in the index were to “upgrade” their resilience to “very strong”, the amount of GDP@Risk would reduce by $73.4bn.

Top ten cities at risk

1. Tokyo $24.31bn

2. New York $14.83bn

3. Manila $13.27bn

4. Taipei $12.88bn

5. Istanbul $12.74bn

6. Osaka $12.42bn

7. Los Angeles $11.56bn

8. Shanghai $8.48bn

9. London $8.43bn

10. Baghdad $7.91bn

Top ten threats

1. Market crash $103.33bn

2. Interstate conflict $80.00bn

3. Tropical windstorm $62.59bn

4. Human pandemic $47.13bn

5. Flood $42.91bn

6. Civil conflict $37.15bn

7. Cyber attack $36.54bn

8. Earthquake $33.96bn

9. Commodity price shock $20.29bn

10. Sovereign default $17.97bn

Europe overview 66 cities. 22 threats

The index analyses 66 European cities – from Dublin on the Irish Sea to Novosibirsk in Siberia. How do they compare with other cities across the globe? European cities account for just 13% of the global GDP@Risk total, in part due to their stronger resilience levels. However, the continent still stands to lose a substantial amount - $70.33bn each year - to risk.

London, Moscow, Paris and Madrid combined account for $24.63bn – more than a third of Europe’s expected loss. However, the risk profiles of London and Paris are markedly different to those of Moscow, reflecting a sharp divergence between the risks affecting western and eastern European economies.

Eastern Europe faces financial risks The index analyses 26 cities in the east of Europe that together 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). Eastern European cities are, in general, more exposed to geopolitical and security risks and less exposed to market crash and cyber crime, compared with Western Europe.

Western Europe faces finance and cyber threats The 40 cities in the west of Europe have an expected loss to GDP of $54.48bn. The types of threats they face differ from the east in a number of critical ways Their key risks are market crash ($17.38bn); cyber attack ($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 resources, which means it suffers more financially when oil prices rise.

Overall, Europe faces 11 risks with an annual expected loss of more than $1bn. Climate risks account for $12.17bn, so the prospect of more extreme weather events caused by climate change needs to be carefully managed by European countries. The index shows that flood will cost the European economy an expected $9.28bn each year – the most significant natural disaster, in terms of damage to the economy’s output.

Freeze and heatwave have less of a financial impact but are risks to which Europe is particularly vulnerable due its geographic location. Europe experienced heatwaves in 2003, 2006, 2007, 2010, 2014 and 20152. The freeze in March 2018 cost the UK economy alone an estimated $1.3bn a day, which is considerably more than the $92m in the index, which averages these occasional severe loss occurrences over time. These UK freeze costs include the loss of commercial activity with the closure of offices and shops, as well as the impacts of delays to the manufacturing supply chain. The construction industry was particularly affected 3.

However, because of Europe’s role as a powerhouse of global trade, it is man-made risk which stands to have the greatest impact on the GDP of European cities. Man-made threats account for 67 per cent of the total risk to the GDP of European cities. The highly developed nature of the European economy means that business risks – cyber attack and market crash, for example - have a strong impact on GDP. Market crash, with a cost to GDP of $23.51bn each year is the largest risk across the continent, accounting for a third of Europe’s total loss to GDP. European businesses would be well advised to maintain robust risk strategies for market volatility, due to their high exposure to this risk.

Top ten threatsEurope at a glance Top ten cities at risk

1. Market crash $23.51bn

2. Cyber crime $9.36bn

3. Flood $9.28bn

4. Human pandemic $6.86bn

5. Commodity price shock $4.75bn

6. Sovereign default $2.56bn

7. Civil conflict $2.37bn

8. Solar storm $2.13bn

9. Interstate conflict $1.81bn

10. Drought $1.39bn

0 5 10 15 20 25

Sixty-six key European cities stand to lose $70.33bn per year to risk. The costliest threats are market crash, flood and cyber attack.

The two halves of the continent have divergent risk profiles. Western European cities are far more likely to lose wealth through cyber attack, flood and commodity price shock. Eastern European cities are more exposed to loss through interstate and civil conflict.

Many European cities are exposed to paradoxical climate extremes. Freeze and heatwave account for $1.21bn and, critically, flood and drought, which account for $10.68bn. Managing water in the face of a changing climate should be a priority for city planners.

Improving resilience could save the continent $2.6bn annually.

1. London $8.43bn

2. Moscow $6.27bn

3. Paris $5.94bn

4. Madrid $3.99bn

5. Barcelona $2.55bn

6. Milan $1.77bn

7. Munich $ 1.72bn

8. Rome $1.61bn

9. Dublin $1.49bn

10. Athens $1.48bn

Fig 2. Top five eastern European cities at risk ($US million)

City by risk GDP@ Global Costliest ranking Risk ranking threat

1. Moscow $6273m 2 Market crash

2. St Petersburg $1446m 11 Market crash

3. Kiev $1193m 18 Civil conflict

4. Warsaw $807m 30 Market crash

5. Budapest $735m 33 Market crash


1. Cities 12

1. Cities. Eastern cities at risk

These cities (see Fig.2) are regional, and in some cases global, centres of commerce. Their high GDP contributes to their high ranking in the index, however it also means that their economies will lose more in dollar terms to catastrophe.

Top ranked cities

Moscow sits second in the European ranking and in 16th place in the global overall ranking. Its high GDP@Risk ($6.27bn) is primarily caused by exposure to man-made risks. Less than a billion of its total GDP@Risk is derived from threats with natural causes. It 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 in the global ranking for this threat, with a GDP@Risk of $789m. However, in February 2018, Standard & Poor’s (S&P) upgraded Russia’s rating to investment class4. This was Russia’s first upgrade since 2006 with S&P crediting “prudent policy…that has allowed the Russian economy to adjust to lower commodity prices and international sanctions”5. Moscow has $989m of GDP@Risk to civil conflict. In 2017, there were a number of anti-corruption protests, with estimates of 60,000 people demonstrating across Russia6. Civil conflict damages economies because prolonged widespread rioting decreases consumption and disrupts economic supply, impacting GDP growth. Six of the top ten European cities who stand to lose most to this risk are situated in Russia. “Sovereign default

is a major risk for several cities in Eastern Europe”

Fig 3. Three cities in eastern Europe ($US million)

Moscow St Petersburg Kiev

GDP@ Risk $6273m $1446m $1193m

Eastern 1 2 3 European ranking

Top five Market crash Market crash Civil conflict threats ($2783m) 1 ($631m) 2 ($504m) 2 by $ (with eastern Civil conflict Civil conflict Interstate conflict European ($989m) 1 ($228m) 3 ($226m) 2 rank) Sovereign default Sovereign default Market crash ($789m) 1 ($180) 2 ($161m) 8 Human pandemic Human pandemic Sovereign default ($457m) 1 ($104m) 3 ($71m) 3 Cyber attack Cyber attack Terrorism ($251m) 1 ($57m) 2 ($55m) 2


1. Cities 14

1. Cities. Western cities at risk

London, Paris and Madrid have highly IT-dependent communities – and consequently are among the five most exposed cities globally to cyber attack.

These cities share similar profiles in terms of their top five risks. London’s greater size and GDP edges it above Paris and Madrid in most of the global rankings. 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 which stand to lose most from this threat include two Spanish cities: Madrid in first place and Barcelona in third. London’s climate has the potential to cause substantial financial loss. The city sits in the global top 10 for freeze and heatwave; flood and drought. The Thames is exposed to both coastal and fluvial flooding, and London has long experienced destructive water surges. The construction of the Thames Barrier has, by and large, kept the city dry for almost three decades. But flood is becoming an increasing risk: the barrier was shut 10 times in its first decade (1982-1992). In the past 10 years it has been shut on 72 occasions. Two German cities, Munich and Stuttgart sit in 3rd and 4th places for the western European ranking for this threat. London is the second most exposed city worldwide, in financial terms, to drought, after Los Angeles. The city receives less rainfall than Paris and New York, and draws most of its water from rivers. Local authorities anticipate supply problems by 2025 and “serious shortages” by 20407. A study by the UK Environmental Agency estimated that the monthly cost of emergency water restrictions in London would be £7-10bn8. This would have a huge impact on the businesses and communities that rely on water for their day-to-day operations and livelihoods.

The final threat where London shows a high ranking is solar storm. It sits in third place globally. In 2017, Londoners flocked to the streets to take photographs of the Northern Lights, an unusual incident so far south. However, these solar flares, if extreme, can be destructive, with the potential to disable power grids, knock out mobile phone networks and disrupt communications systems. The most severe solar storm in history, the Carrington event, occurred in 1859 when auroras were seen as far south as the Caribbean. The storm led to the failure of telegraph systems in Europe. However, disruption was minimal compared to what our tech-reliant society would experience today. The index indicates that London, and other cities in northern latitudes, primarily Moscow, Dublin and the Scandinavian cities, are justified in their efforts of hardening their power grids to this threat. Parisians are growing used to the sight of the Zouave’s statue being engulfed by the rising waters of the Seine, with major events in 2016 and 2018. The index estimates an annual cost to Paris’ GDP from flood at $1.16bn putting it in 7th place globally. Paris is in second position globally for heatwave. This threat is less costly than others, in financial terms; however, as the 2003 heatwave showed, when 3,000 Parisians died, it can have a devastating social cost. It also created new risks for France’s nuclear reactors, some of which had to shut due to river water being too low for cooling operations. As a consequence, France (which is Europe’s main electricity exporter) was forced to cut its exports by more than half 9.

MoscowTop three risks– Market crash $2.78bn

– Civil conflict $0.99bn

– Soverign default $0.79bn

LondonTop three risks– Market crash $1.83bn

– Flood $1.64bn

– Cyber attack $1.39bn

ParisTop three risks– Market crash $1.45bn

– Flood $1.16bn

– Cyber attack $1.10bn

London is the second most exposed city worldwide, in financial terms, to drought


1. Cities 16

1. Cities. Western cities at risk

Fig 4. Top five western European cities at risk ($US billion)

City by risk $ loss European Costliest ranking (bn) rank threat

1. London $8.43 2 Market crash

2. Paris $5.94 4 Market crash

3. Madrid $3.99 5 Market crash

4. Barcelona $2.55 7 Market crash

5. Milan $1.77 9 Market crash

Market crash isthe biggest risk inEurope’s majorfinancial centres

32% of western European cities’ annual GDP is at risk from market crash

“London’s greater size and GDP edgesit above Paris and Madrid in most of the globalrankings”

Fig 6. Europe: finance economics and trade threats

Finance, economics and trade ($US million)

Market crash Commodity price Sovereign default shock

Highest ranked Moscow $2783m Warsaw $61m Moscow $789m eastern St Petersburg $631m Prague $44m St Petersburg $180m European Budapest $420m Budapest $42m Kiev $71m cities

Highest ranked Madrid $2441m London $678m Athens $252m western London $1829m Paris $536m Madrid $87m European Barcelona $1510m Milan $232m Milan $85m cities


2. Threats 18

2. Threats. Finance, economics and trade

Market crash has the greatest potential to cause financial loss for more than half of European cities. It is a $2bn dollar loss for two: Moscow and Madrid. Commodity price shock is a major risk for practically all western European cities except Oslo, the capital of oil-rich Norway. The European Union (EU) spends more than €1 billion per day on imported energy - almost 90% of its crude oil is imported - which is why the index shows western Europe is the most exposed region of the world to commodity price shock. The total exposure for Eastern Europe is less due to Russia’s oil wealth.

In Europe $30.8bn is at risk from finance, economics and trade threats

$23.5bn is under threat from market crash in European cities

Extreme ° The prospect of more extreme temperatures as a result of climate change is concerning in terms of threat to GDP


2. Threats 20

2. Threats. Natural catastrophe and climate

A report issued by the European Environmental Agency (EEA) in 2017 demonstrated that Europe – indeed the entire Northern Hemisphere – is warming faster than other regions 11. The index highlights that many European cities could be affected financially by climate-related risks: flood and drought; heatwave and freeze.

Western European cities are particularly affected by one risk: flood. It is the costliest weather event in Europe, and London and Paris both appear in the top 10 global ranking for this threat. The EEA believes sea-level rise is accelerating and it remains vital that Europe invests in flood defences for a changing climate. Flooding caused by rainfall also appears to be a rising problem, with reports showing that insurance pay-outs to cover European floods have doubled since 198012. Paradoxically, drought is also a rising threat. The EEA estimates that renewable water resources per capita fell by 24% between 1960 and 2010, with southern Europe particularly affected 13. European cities also appear high in the global rankings for freeze and heatwave, so the prospect of more extreme temperatures as a result of climate change is concerning in terms of threat to GDP. Freeze is not, compared to flood, a costly risk in relative terms, but it is a particularly European problem, due to Europe’s northern location, costing just over $500m. Europe is, in general terms, less exposed to geophysical threats than other regions. However, earthquake is a considerable risk for Italian, Spanish and several cities in the Balkans. The latter have a higher GDP@Risk, with Bucharest standing to lose more to this threat ($199m) than any city in Europe.

Naples, which sits in the shadow of Mount Vesuvius, is a sharp reminder of what happens when prosperous European cities – as Pompeii once was – ignore the threats of the natural world. Its exposure to volcano is $145m.

Flood is the costliest weather event in Europe

$9.3bn is at risk from flood in European cities

“Europe is warming faster than other regions”

Natural catastrophe and climate ($US million)

Highest ranked eastern European cities

Flood Temperate Freeze Drought Heatwave Earthquake Volcano windstorm

Warsaw – Moscow Moscow Moscow Bucharest – $140m $66m $117m $14m $199m

Prague – Warsaw Bucharest Bucharest Sofia – $87m $20m $50m $6m $138m

Moscow – St Petersburg Warsaw Bratislava Zagreb – $80m $15m $36m $3m $48m

Highest ranked western European cities

Flood Temperate Freeze Drought Heatwave Earthquake Volcano windstorm

London London London London Paris Rome Naples $1640m $187m $92m $473m $90m $103m $145m

Paris Paris Paris Madrid London Barcelona Rome $1156m $98m $72m $122m $46m $85m $21m

Munich – Stockholm Barcelona Vienna Athens Reykjavik $371m $44m $76m $17m $79m $16m


2. Threats 22Fig 7. Europe: natural catastrophe and climate threats

Tech and space ($US million)


Cyber attack Nuclear accident Power outage Solar storm

Moscow Bratislava Moscow Moscow $251m $4m $73m $191m

St Petersburg Vilnius St Petersburg St Petersburg $57m $3m $17m $56m

Warsaw Prague Budapest Warsaw $53m $1m $15m $33m


Cyber attack Nuclear accident Power outage Solar storm

London Zurich London London $1387m $29m $165m $362m

Paris London Paris Stockholm $1098m $20m $130m $167m

Madrid Brussels Milan Dublin $358m $20m $59m $129m


2. Threats 24

2. Threats. Technology and space

For most western European cities cyber attack is one of the top three threats. A decade ago cyber barely registered on risk managers’ agendas; however, the index shows it is now a prevalent threat for business. The issue – for insurers as well as wider business – is how to keep up with rapidly evolving cyber threats. Attacks against businesses have almost doubled in five years14. In 2017, there were a number of high-profile ransomware attacks: the WannaCry attack—affected 300,000 computers across 150 countries and NotPetya caused quarterly losses of US$300 million for several major businesses 15.

Cyber is an invisible, intangible threat. With the development of the internet of things, cyber attacks have the potential to cause physical damage to infrastructure such as power stations, as well as data loss. Appropriate mitigation strategies need to be developed. It is also a reputational risk for businesses whose customers’ data is hacked. From May 2018, the EU’s General Data Protection Regulation entered into force. This is designed to strengthen consumer rights over their personal data and businesses who fail to uphold the new standards will face stringent penalties, which will impact their bottom lines and reputations. At present, cyber is a much larger threat to western European cities, which stand to lose $8.67bn to this threat each year. In contrast, the combined exposure of eastern European cities is under $700m. Only Moscow will lose more than $100m to this threat, although this will change as commerce becomes more digitalised in this region.

Fig 8. Europe: technology and space threats

Geo politics and security ($US million)


Civil conflict Interstate conflict Social unrest Terrorism

Moscow Moscow Moscow Moscow $989m $231m $25m $197m

Kiev Kiev Bucharest Kiev $504m $226m $24m $55m

St Petersburg Vilnius Kiev St Petersburg $2287m $59m $11m $45m


Civil conflict Interstate conflict Social unrest Terrorism

London Helsinki Madrid London $83m $263m $118m $118m

Paris London London Paris $68m $242m $85m $93m

Madrid Paris Barcelona Dublin $21m $225m $73m $50m


2. Threats 26

2. Threats. Geopolitics and security

If anything divides East and West Europe, it is geopolitics. Eastern European cities are particularly vulnerable to these threats: six of the ten European cities which stand to lose most to civil conflict are in Russia. Western European cities are more likely to lose GDP to social unrest, with eight of the ten European cities most affected financially in western Europe. This includes Madrid and Barcelona, as seen in the latter through the issue of Catalan independence.

Fig 9. Europe: geopolitical and security risks

“Six of the ten European cities which stand to lose most to civil conflict are in Russia”

High-profile terrorist attacks have occurred in Belgium, France, Germany, Spain and the UK over the past two years. However, despite the tragic loss of life, the economic impact has been relatively light. The index shows that terrorism has more impact on GDP in cities that experience frequent attacks - in the Middle East and Africa, for example.


2. Threats 28

2. Threats. Health and humanity

Since the previous City Risk Index was published in 2015, the Ebola crisis has receded and WHO initiatives have improved surveillance for emerging infectious diseases.

Fig 10. Europe: health and humanity threats

However, human pandemics still pose significant financial cost to cities. Europe, a crossroads for trade with several major air-hubs, is a central nexus for human-transmissible pandemics. Europe would not be as susceptible to disease as it was in the era before antibiotics when it suffered from the 1918 Spanish Influenza pandemic, and even back in the Middle Ages when the Black Death decimated the population and crippled the economy of the continent. While strong healthcare systems mitigate the risks from pandemics to European cities, any epidemic outbreaks would disrupt trade considerably.

“Europe, a crossroads for trade with several major air-hubs, is a central nexus for human-transmissible pandemics”

Health and humanity ($US million)


Human pandemic Plant epidemic

Moscow Moscow $446m $22m

Warsaw Warsaw $111m $7m

St Petersburg Belgrade $104m $6m


Human pandemic Plant epidemic

London London $885m $75m

Paris Paris $684m $59m

Madrid Dublin $237m $46m


3. Resilience 30

3. Resilience

In 2017, Portugal experienced devastating wildfires, the WannaCry cyber attack attracted international headlines and the British Isles were battered, once again, by storms. Paris flooded in January 2018. These risks are well known and it is well understood they cause financial losses. The impacts of other risks in this index, such as solar storm and human pandemic are less familiar, but no less important to be aware of and to mitigate.

The index shows European cities are on the whole more resilient than those in other regions. Of the 36 cities graded as having “very strong” resilience, half are in Europe. However, of these 18 cities, just two - Prague and Ljubljana - are in the eastern European region. Only one European city, Kiev, sits in the lowest resilience category. However, 11 eastern European cities are categorised as having weak resilience. They include all Russian cities in the index as well as Sarajevo. In general, the continent has stronger controls in place to mitigate its risks and is well insured. However, if every European city was to maximise its resilience rank, it could save the continent just over $2.6 billion. Almost 90% of this sum would be achieved by improving the resilience of eastern European cities. Insurance can play a valuable dual role in reducing the impacts of disasters by building a city’s resilience and reducing its vulnerability. After an event, it covers the rebuild cost, meaning the economy can recover more quickly. For example, business interruption policies provide pay-outs for lost earnings following an event, allowing businesses to trade on and reduce the impact on the wider economy. Insurance also reduces risk before an event takes place by stipulating various safety levels and minimum standards as a condition of insurance policies. With high asset prices, western European cities are generally well insured in terms of property policies, which cover the rebuild costs after a physical event. However, the take up of policies for emerging threats such as cyber attack is still relatively low, despite this being a top-three risk for most western European cities. Critically, there is still an insurance gap in many

eastern European cities which, if reduced, would lessen the impact of many of these threats to GDP in these cities. The index details the cost of risk facing Europe. However, governments and the EU can mitigate these risks. They can improve compliance with building codes for earthquake, and manage and protect communities in flood zones. Businesses can build good quality factories and offices. Perhaps Europe’s challenge is to build resilience to longer term risks despite shorter term priorities - resisting the pressure to develop flood plains, for example.

“Europe, if every European city was to maximise its resilience rank, it could save the continent just over $2.6 billion”

Very strong – 27%Strong – 45%Moderate – 9%Weak – 17%Very weak – 2%

Fig 11. Europe: resilience rankings


3. Resilience 32

3. Resilience. The case for stronger infrastructure

An important action city officials could take to protect cities in Europe is to invest more heavily in infrastructure. Europe’s challenge is to adapt infrastructure which in many cases was designed a century ago for much smaller populations. A report published by the European Investment Bank (EIB) in December 2017 reported that infrastructure investment has stabilised at 1.8% of EU GDP, down from 2.2% in 2009. The decline is strongest in countries with the lowest infrastructure quality. The EIB also noted that investment in climate change mitigation is estimated at 1.2% of EU GDP, and has declined from 1.6% in 2012.

The City Risk Index provides strong reasons for why European cities need to invest more in resilient infrastructure. It shows that European cities will need to save more than $70bn to protect its GDP from these threats. Strong infrastructure will not negate all risk, but policymakers should view the costs of mitigating risks not as expenditure, but as a saving against losses. Business, governments and insurers have a collective responsibility to build resilience. Cities are made up of a diverse and complex mix of institutions, ecosystems, assets and infrastructure that are connected and mutually interdependent. Disruption to one part of the system - utility and transport networks, communications systems and water supplies, for example – can cause failure in other parts, with far-reaching local and global implications. In 2017, Lloyd’s and Arup published a report on how to improve city resilience. Read the report here. www.lloyds.com/futurecities

Next steps – European governments and businesses to ensure

investment in infrastructure are increased.

– Businesses to maintain strong controls to deal with the risk of financial threats

– Governments and businesses to invest in better water management, including smart technology, to reduce waste and to reduce the number of drought and flood events.

– Northern cities to maintain mitigation plans to manage the impact of solar storms.

Business, governments and insurers have a collective responsibility to build resilience


References 33

References

1 When the term global is used it refers only to all cities in the index, not all cities in the world many of which were not analysed by the index.

2 European Environmental Agency. https://www.eea.europa.eu/data-and-maps/indicators/global-and-european-temperature-4/assessment

3 https://www.theguardian.com/uk-news/2018/mar/03/freezing-weather-storm-emma-cost-uk-economy-1-billion-pounds-a-day

4 https://www.bloomberg.com/news/articles/2018-02-25/investors-react-as-russia-emerges-from-3-years-at-junk-roundup

5 https://www.bloomberg.com/news/articles/2018-02-23/russia-gets-first-s-p-upgrade-in-over-decade-to-exit-junk-status

6 https://www.theguardian.com/world/2017/mar/26/opposition-leader-alexei-navalny-arrested-amid-protests-across-russia

7 http://www.bbc.co.uk/news/world-42982959

8 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/504682/ea-analysis-water-sector.pdf

9 http://www.grid.unep.ch/products/3_Reports/ew_heat_wave.en.pdf

10 https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/energy-security-strategy

11 https://www.theguardian.com/environment/2017/jan/25/europe-faces-droughts-floods-storms-climate-change-accelerates

12 https://www.theguardian.com/environment/2017/jan/19/flood-disasters-more-than-double-across-europe-in-35-years

13 https://www.eea.europa.eu/data-and-maps/indicators/use-of-freshwater-resources-2/assessment-2

14 WEF

15 WEF


Acknowledgements 34

Acknowledgements

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Disclaimer This report has been produced by Lloyd’s for generalinformation purposes only. While care has been takenin gathering the data and preparing the report, Lloyd’s does not make any representations or warranties asto its accuracy or completeness and expresslyexcludes to the maximum extent permitted by law allthose that might otherwise be implied. The viewsexpressed in the paper are Lloyd’s own. Lloyd’saccepts no responsibility, and shall not be liable, forany loss which may arise from reliance upon theinformation provided. No responsibility or liability is accepted by theSociety of Lloyd’s, the Council, or any Committee orboard constituted by the Society of Lloyd’s or theCouncil or any of their respective members, officers,or advisors for any loss occasioned to any personacting or refraining from action as a result of anystatement, fact, figure or expression of opinion orbelief contained in this document or communication.This report does not constitute advice of any kind. © Lloyd’s 2018 All rights reserved

About Cambridge Centre for Risk Studies The Centre for Risk Studies is a multidisciplinary centre of excellence for the study of the management of economic and societal risks. The Centre’s focus is in the analysis, assessment, and mitigation of global vulnerabilities for the advancement of political, business and individual decision makers. The Centre provides frameworks for recognising, assessing and managing the impacts of systemic threats. The research programme is concerned with catastrophes and how their impacts ripple across an increasingly connected world with consequent effects on the international economy, financial markets, firms in the financial sectors and global corporations. To test research outputs and guide new research agendas, the Centre engages with the business community, government policy makers, regulators and industry bodies.

Cambridge Centre for Risk Studies Disclaimer The views contained in this report are entirely those of the research team of the Cambridge Centre for Risk Studies, and do not imply any endorsement of these views by the organisations supporting the research, or our consultants and collaborators. This report is not intended to provide a sufficient basis on which to make an investment decision. The Cambridge Centre for Risk Studies develops hypothetical scenarios for use in improving business resilience to shocks. These are contingency scenarios used for ‘what-if’ studies and do not constitute forecasts of what is likely to happen.

The results of the Cambridge Centre for Risk Studies research presented in this report are for information purposes only. Any commercial use will require a license agreement with the Cambridge Centre for Risk Studies.


Acknowledgements 35

Acknowledgements

Key contacts Trevor Maynard Head of Innovation [email protected] For general enquiries about this report and Lloyd’s work on emerging risks, please contact [email protected]

Acknowledgements Cambridge Centre for Risk Studies Simon Ruffle, Director of Research & InnovationDr Andrew Coburn, Director of the Advisory BoardJennifer Copic, Research AssociateProfessor Daniel Ralph, Academic DirectorDr Michelle Tuveson, Executive DirectorJessica Tsang, Research AssistantDr Andy Skelton, Senior Risk Researcher Further thanks go to the following for their expertise, feedback and assistance with the study:

Data analysis & text provided by Fiona Sinclair Editor Flemmich Webb, Senior Manager, Strategic Communications, Lloyd’s Design Zach John Design

Picture credits Map tiles by Stamen Design, under CC BY 3.0. Data by OpenStreetMap, under ODbL.

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Lloyd’s City Risk Index · Europe is particularly vulnerable due its geographic location. Europe experienced heatwaves in 2003, 2006, 2007, 2010, 2014 and 20152. The freeze in March