- Climate change: Urban cities will become increasingly susceptible to extreme weather events that will grow in frequency and severity, says Lloyd's. Cities also contribute heavily to climate change, as they produce a large portion of the earth's carbon dioxide emissions.
- Growing middle class: Developing countries are seeing a growing middle class, which present unique challenges and opportunities. In many places, citizens are losing trust in their government, media and large corporations, resulting in demonstrations and protests.
- Geopolitics and society: Political tensions are rising worldwide, such as recent protests against police violence in the U.S. and Nigeria. These have deterred long-term investments, says Lloyd's.
- Natural catastrophe and climate: The U.S. recently experienced its record 11th named storm to make landfall in a single year. As countries' populations move more towards urban centers, the cities and residents will fave more vulnerabilities and losses related to weather events.
- Technology and space: Smart technologies and the Internet of Things (IoT) that carry vast amounts of data are becoming more at risk. According to Lloyd's, a catastrophic event, such as space weather that knocks out satellite communications or disrupts information flow, could "threaten essential infrastructure on which cities rely."
- Finance, economics and trade: Cities can lose the most GDP through financial risks, including market crashes, commodity price shock, and sovereign default.
The role insurance plays
Insurers and reinsurers play an essential role in helping cities manage and transfer risks. Coverage options, such as specialty policies to protect against political risks, natural catastrophes and cyber risks, are just one step municipalities should take. However, Lloyd's asserts that cities, in general, are underinsured for reasons such as knowledge gap, cultural gap, or lack of communication. But, insurers could be leaving business on the table if they are not pursuing partnerships with cities. A few ways to do this include sharing data and analytics, assisting cities with risk preparation and mitigation practices, and improving cross-sector learning between public and private companies. "Governments, insurers and other stakeholders should work together to ensure there is a greater understanding of the economic and social consequences of poor risk management, and facilitate the development of appropriate risk transfer solutions," the report urges. Download the full report on the Lloyd's of London website here. Related:
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