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Billions at risk from market crash and conflict every year, new Lloyd’s analysis finds

Mon 16 Dec 2019

Almost $150bn a year is at risk in 279 cities around the world from market crash, commodity price shock and sovereign default - according a new Lloyd’s report.

The study, which draws on data in the Lloyd’s City Risk Index, found that about two-thirds of these potential losses from finance, economic and trade risks – - $103bn - would come from market crash.

The index, which analyses the impact of 22 threats in the world’s largest cities representing 41% of global GDP, found that New York has the most at risk with $3.1bn each year, followed by Sao Paolo ($3bn) and Moscow ($2.8bn). London is eighth in the index with $1.8bn at risk annually.

Lloyd’s analysis also found geopolitical and security risk – interstate conflict, civil conflict and social unrest, and terrorism - has an estimated annual impact of $133 billion globally. Tokyo tops the index with $9bn at risk annually, followed by Baghdad ($7.5bn) and Istanbul ($5.9bn).

The index found that top geopolitical risk is interstate conflict, which puts $80bn of GDP at risk annually and stands to cost cities almost nine times more than terrorism.

Civil conflict also poses a major threat, with a cost to GDP of $37bn annually in the cities in the index. The recent disturbance in Hong Kong has pushed the territory into recession for the first time in a decade, with its economy shrinking 3.2% between July and September, compared to the same period in 2018.

Despite the potential economic impact of the political risk, insurance buying is lowest in those countries that stand to lose the most GDP to political and security risk.

it is also the case that small and medium-sized enterprises have less insurance cover than large business, and consequently remain vulnerable to geopolitical risks.

As global trade faces mounting pressure, driven in part by some governments that are increasingly turning towards protectionism, Lloyd’s urges businesses to examine their risk management strategies to ensure they are fully protected.