Man-made threats account for 53% of all risks to the economic output of New Zealand’s largest cities, according to the latest edition of Lloyd’s City Risk Index (CRI).
The study notes that a financial market crash places US$320 million at risk annually across Auckland and Wellington – more than 34% of total annual risk, making it the largest threat to the GDP of both cities. Flood and volcano risks are listed as the second and third largest threats, with US$120 million and US$100 million estimated to be at risk respectively.
Cyberattacks are also noted as a significant risk, threatening over US$100 million of Auckland and Wellington’s annual GDP.
The CRI’s estimated cost assessment revealed that an extreme volcanic event, flood or an earthquake would be the costliest threats, and any of these events on a national level would likely cost between 38% and 86% of each city’s annual economic output.
“While natural disasters have played a prominent role in New Zealand’s threat landscape historically and will continue to, we see a rise in emerging man-made risks,” said Lloyd’s Australia and New Zealand country manager Chris Mackinnon.
Despite these threats, the cities are among those to receive the highest possible resilience rating of very strong - higher than all Australian cities analysed and among the 16 highest of the 92 cities surveyed across Asia-Pacific.
“While New Zealand should be incredibly proud of the best-in-class resilience it has built, the public and private sector should also maintain an eye on future risks,” Mackinnon noted.
He added that approximately half of all total GDP risk can be protected by improving aspects of city infrastructure and crisis management - and insurance plays a key role in that process.
“The CRI supports the case for more resilient infrastructure and institutions, and increased global access to insurance,” he said. “Insurance claim payouts are a key source of capital injection after a catastrophe, and insurance plays an important part in the recovery process.”
“Investment in risk management measures, including increasing insurance take-up, could mitigate the economic losses associated with all threats – both man-made and natural,” Mackinnon explained. “Our index is designed to help policymakers, businesses and societies understand the financial impact of risk in cities and drive home the importance of building resilience.”