These cities, with their expensive assets and large populations, present both an insurance challenge and opportunity. At a time when mature insurance markets in the West are stagnating, it is rapidly developing countries such as China that are seeing rapid premium growth.

In March 2014, the Chinese Government unveiled its urbanisation plan for the 2014 to 2020 period. One of the basic principles for pushing forward urbanisations before 2020 is ensuring more of the population can enjoy the country's modernisation achievements, said the plan.

Other principles set out by the plan include coordinating urban and rural development, optimising macro-level city layouts, making basic public services accessible to all urbanites and pursuing better ecology: more clean air and safe drinking water.

At present, the proportion of urban residents to China's total population standards at 53.7%, lower than developed nations' average of 80%. The government aims to increase this to 70% in just over a decade.

Megacities are defined as cities with over ten million inhabitants. Concentrating such a mass of humanity into an urban space presents numerous challenges. Having adequate infrastructure to move people from A to B, enough resources to go around, urban planning and resilient buildings are just one aspect.

Technology and engineering are expected to play an important role in tomorrow's big cities, with a significant focus on transportation. In 2010 China overtook the US as the world's biggest car market with 13.5 vehicles sold in 2009. This grew to over 20 million in 2013.

The potential of autonomous vehicles and investment in underground subways, high-speed rail and other mass transport mechanisms is also expected to become increasingly important. Many infrastructure projects are already underway. In 2012, the government approved 25 new subway projects with an investment of $126.98bn.

Strain on resources

The strain on resources is a particular challenge for any megacity. Globally, today's cities represent two percent of the Earth's surface but use 75% of its resources, according to Euramet.

In China, water scarcity is a big concern. Henan in central China is currently experiencing a drought with precipitation at less than half of normal levels, affecting food production and restricting drinking water supplies.

"Water supply is a serious issue in northern China and last year it was the worst in the last 60 years, so there were rolling water blackouts," says Robert Wiest, head of strategy and operations, Swiss Re Asia. "So a big question is, how do you secure your water supply which is extremely important to sustain the life of the people?"

Various projects have been mooted by the government to improve the water supply. This includes the ambitious $50bn South-North Water Diversion Project which, when completed, is designed to see water moved along 2,000 miles of canals, some of them across the Himalayan plateau, from the Yangzi in the south to the Yellow River in the north.

Other megacity vulnerabilities are created by having concentrations of people and assets in close proximity. The consequences of natural catastrophes, pandemics, climate change and pollution are magnified in densely-packed urban environments.

"In general Asia is very sensitive to the topic [of megacity exposures] because in 2003 places like Hong Kong and Beijing went through SARS," says Wiest. "Nobody was on the street. These cities shut down and it had a big impact on the daily life of the people and the economies. It's still very present memory and that makes it distinct to most other places I've known."

Catastrophe exposures

China's vulnerability to natural perils is another issue. Five of the world's top 20 most expensive natural disasters since 1965 have occurred in China, according to the World Bank and IMF. While insurance penetration is still very low (at 3.8% in 2011 according to Lloyd's Market Intelligence), premiums are growing rapidly.

"If you take a place like Beijing and Tianjin - they are quake exposed," says Wiest. "We took an historic earthquake which hit the place around Beijing and modelled that on the current infrastructure, size and population of Beijing. And you can scale it on the GDP of the country and it's a major event on a nationwide basis."

Wiest says there is little doubt that China will become another peak catastrophe zone for the reinsurance industry after US wind and quake, Japanese wind and quake and European windstorm.

"We know for example what the rebuilding of the Sichuan province after the 2008 earthquake cost," he says. "It won't be one peak scenario - there is the quake side but also the typhoon and flood scenarios. Sooner or later you will have China on the same landscape as the other five peak scenarios."