Cities are exposed to a greater diversity of risks than ever before, including cyber threats, infrastructure disruptions and natural hazards.
The rising cost of disasters is a growing concern for government, businesses and communities around the world. In the past decade alone, direct losses from disasters amounted to $1.4trn. Cities must manage these risks to improve resilience and build a sustainable growth path.
At our Meet the Market event in Frankfurt on 11 April, building resilience in Europe was one of the main topics of discussion. CEO Inga Beale also highlighted Lloyd’s plans for continuing to do business with EU27 customers. In addition, participants examined latest trends on transactional liability insurance, political risk insurance and claims.
Lloyd’s Country Manager for Germany and Austria, Jan Blumenthal, focused on the changing risk landscape facing cities today in Germany and across the EU27. As urban institutions, ecosystems, assets and infrastructure become more connected and interdependent, disruption also spreads more widely and rapidly. A case in point is failure in local communications systems, which can have far-reaching implications nationally and even globally.
Cyber risk is one of the main concerns for governments and CEOs alike. More than half of German companies have been targeted by cybercrime in recent years, according to a 2017 study by digital association Bitkom. German companies have been targets of economic espionage or data theft with annual losses amounting to €55bn as a result. “Protecting cities has a high, tangible value,” emphasised Jan in his presentation to brokers and risk managers in Germany.
In the EU27 capitals, from Berlin to Paris, London, Madrid or Rome, one of the primary goals is to ensure crucial service infrastructure remains operational or can recover as quickly as possible when any of the above threats materialises. These efforts require a focus on three crucial aspects, namely preventing failures, expediting recovery and transforming performance.
Insurance can play a pivotal role in addressing all three aspects by building resilience and improving the sustainability of economies. It has been estimated that a 1% rise in insurance penetration leads to increased investment equivalent to 2% of national GDP. However, Jan noted that “cooperation between key local stakeholders remains crucial.” Insurers must build partnerships with businesses and local governments to enhance understanding of the risks, their exposure to a diverse range of risks and how these can be mitigated.
Last year we partnered with engineering firm Arup to develop a new set of principles to guide the planning, construction and operation of key components of city infrastructure to improve resilience. Multiple cities are rightly seeking to incorporate greater resilience into their urban DNAs as they better understand the economic and social consequences of poor risk management.
Lloyd’s Brussels subsidiary, leading the way in building greater resilience in Europe
With the depth and breadth of our expertise in developing innovative solutions for the most complex risks over the past 300 years, Lloyd’s has made improving city resilience a core priority of our operations. Throughout our history, Europe has always been an important market for Lloyd’s. From January 2019, our new Brussels subsidiary will ensure that Lloyd’s customers continue to have access to our specialist, innovative policies after Brexit. By establishing a subsidiary at the heart of Europe, we have taken our future into our own hands to make sure that our EU27 customers will continue to benefit from the unparalleled strength, trusted security and exceptional service of the Lloyd’s market.
The continued access to Lloyd’s expertise and services by our EU27 partners and customers will contribute towards building greater resilience and supporting European cities to thrive. “We also hope that the benefits of our current partnership with the City of Cologne can be replicated across Europe,” said Blumenthal. At a time when governments, businesses and communities are faced by increasingly complex man-made and natural risks, insurance will remain a key enabler of resilient growth. Our Brussels subsidiary will be at the forefront of these efforts, delivering the most innovative solutions to better manage risks and unlock further growth in Europe.