Event: Sub-prime mortgage crisis, from 2007
Location: Athens, Greece
Economic cost: Greek GDP declined from $341.6bn in 2009 to $241.72bn in 2014.
Description: The sudden collapse of the sub-prime mortgage market in the US brought down several financial firms, notably Lehman Brothers, and caused a worldwide financial crisis.
Damage: The crisis left Greece acutely exposed and today its economic future remains in the balance. It was forced into a national debt reduction programme, which ushered in a period of austerity. GDP declined by almost 30% between 2009 and 2014. As 45% of GDP is concentrated in the Attica region, which includes Athens, the city suffered particularly badly. Greece’s unemployment rate peaked at 27.25% in 2013; for under-25s it rose to more than 50% nationally, but touched 60% in Attica in 2013.
Insight: The financial crisis revealed the nature of systemic risk in a highly-connected global world, showing how contagion from one market could ripple through the global financial system. There were also lessons for modelling and predictive analysis, particularly the acceptance that there will always be “Black Swans” – rare, big impact events that are hard to predict based on past experience, as described in Nassim Nicholas Taleb’s 2007 book, The Black Swan.
Insurance solutions: The Lloyd's market offers cover in relation to Market crash. Examples of this include but are not limited to: Trade credit insurance, surety bonds, contingent business interruption (covers triggered by supply chain insolvency), event cancellation and specialist contingency covers, construction delay-in-start-up insurance, travel insurance, political risk, contract frustration, financial guarantee, directors' and officers' cover, commercial crime insurance, errors and omissions and other specialist professional indemnity products.
Image: The headquarters of Lehman Brothers Holdings, New York, on 15 September 2008, the day it filed for bankruptcy (Getty Images)
Sources: Eurostat; Hellenic Association of Insurance Companies; Hellenic Statistical Survey; OECD; Trading Economics; Nassim Nicholas Taleb: The Black Swan