Mind the risk: cities under threat from natural disasters

The world's sprawling cities are centres of economic activity and growth. But when a natural disaster hits a densely populated area, the effects can be catastrophic. A Swiss Re study looks at the human and economic risks faced by urban communities around the globe.

The world's big and sprawling cities are centers of economic activity and growth. But many of them are also highly exposed to natural hazards. As more people move to the cities and businesses invest in their local economy, more lives and assets concentrate in disaster-prone areas. Strengthening the resilience of these communities is therefore becoming a matter of urgency. "Mind the Risk" is Swiss Re' central communications product informing our outreach effort on this important topic and demonstrates our thought leadership and knowledge in this area.

Why did Swiss Re do this study?

With the study, we aim to increase the awareness about natural disaster risk and the impact it can have on people and the economy, both from a global and local perspective. We also want to highlight the particular threat natural disasters pose to urban areas, which are densely populated and have a high concentration of properties and economic assets. Greater risk awareness supports adaptation measures which help save lives and allow businesses to prosper. In regard to the financial consequences of a disaster, Swiss Re provides capital to the real economy and pays out claims when disaster losses occur.

Have we ever seen the type of major disasters included in the analysis?

Yes we did, for example the Indian Ocean tsunami of 2004, the Japan earthquake/tsunami of 2011, and the Haiti earthquake of 2010 which hit and seriously damaged the capital city of Port-au-Prince. Other examples further back are Yangtse River Flood (1931), the Bhola Cyclone in Bangladesh 1970, or the Tangshan earthquake 1976 with hundred thousand of fatalities.

How frequently do we expect such events to occur?

We took a look at the really large natural disaster events. From the perspective of a single metropolitan area, these events are rare, i.e. they happen no more than every few hundred years. Globally speaking, however, such events are expected to happen every few years. These are events where protection measures typically fail because the force of the disaster exceeds the impact anticipated.

Who is our target audience?

First and foremost, the study is aimed at informing all relevant decision makers who are involved in urban (resilience) planning such as city/local authorities. It is also targeted to commercial businesses and insurance companies active in this field; to individuals and home owners; as well as to international/regional development banks who focus on financing developing economies.

What insurance products are available and relevant for our clients?

Swiss Re offers a wide range of products for a variety of risks that could affect urban areas. Here are a few examples in the context of city resilience:

• Standard fire and allied perils insurance is often insured by a local insurance company where Swiss Re offers reinsurance coverage to mitigate peak losses.
• For public sector clients and local authorities, this could include covers for damage to property and infrastructure caused by earthquakes, flood, or fires.
• For corporate clients tailor-made coverage with various structures is offered.
• Furthermore, we provide covers for cancelled large social or sporting events, which are held regularly in cities.