India's top cities have $179.8 bn GDP at risk, says Lloyd's City Risk Index

This index presents an analysis of economic output at risk in 301 major cities from 18 man-made and natural threats over a ten-year period

India’s top 10 cities have $179.8 billion (Rs 11.9 lakh crore) GDP at risk, according to the Lloyd’s City Risk Index 2015-2025. This index presents an analysis of economic output at risk (GDP at risk) in 301 major cities from 18 man-made and natural threats over a ten-year period.

Catastrophes caused by natural events, such as extreme weather, pandemics and plant epidemics account for just over half ($98.1 billion) of GDP at risk in the 10 cities. Mumbai has the largest total GDP at risk with a $47.38 billion (Rs 3.13 lakh crore) risk exposure. Almost one quarter of the city’s potential losses are related to pandemic risk, followed by terrorism at 16.77 per cent, market crash at 12.94 per cent and flood at 12.89 per cent.

Globally, Mumbai has the largest GDP exposure to terrorism in the Index at almost $8 billion (Rs 52,960 crore) and the second highest exposure to power outage with $1.92 billion (Rs 12,710.4 crore) of GDP at risk.

Based on original research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, the index finds that a total of $4.6 trillion of projected GDP is at risk from man-made and natural disasters in these cities around the world.

The index, which will be updated every two years, is aimed at stimulating further discussions between insurers, governments and businesses on the need to improve resilience mitigate risk and protect infrastructure.

In India, the index found the cities of Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kanpur, Kolkata, Mumbai, Pune and Surat together will generate an average annual GDP of $1.4 trillion in the coming decade. However, 12.6 per cent of this economic growth is at risk from the combination of 18 man-made and natural threats.

Across the ten cities combined, the largest economic exposure is to pandemic risk, which could put $39.65 billion of GDP at risk, followed by flood at $33.84 billion, market crash at $21.13 billion, oil price spike at $20.81 billion and terrorism at $16.07 billion. The immense density of populations in urban areas, large numbers of people commuting and access to health services are significant contributing factors in the vulnerability to a pandemic.

The Index identified that 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. Further, it added that man-made risks such as market crash, power outages and nuclear accidents are becoming increasingly significant, associated with almost half the total GDP at risk.

Vincent Vandendael, Director of Global Markets, Lloyd's said, "Insurers, governments, businesses and communities need to think about how they can improve the resilience of infrastructure and institutions. Insurance is part of the solution".

Lloyd's to set up India operations after reviewing regulations

The specialist insurance market Lloyd’s will look into the regulatory framework for foreign branches and separate regulation for Lloyd’s before entering the Indian market. Vincent Vandendael, director of global markets, Lloyd’s that they are in discussion with the regulator on this issue.

“India is a top target market for Lloyd’s. We want to develop the economy and participate and complement the Indian market,” he said.  He explained that while they have about 60 classes of business, they can bring in more to India, especially in areas like agriculture insurance and also areas like cyber insurance which he added is their best-selling product in many areas.

Lloyd's will have a single license in India, and other syndicates could join them. Vandendael explained that quite a number of syndicates were keen to join them.