New Zealand has $7.52 billion GDP at risk
New Zealand has $7.52 billion GDP at risk according to the Lloyd’s City Risk Index 2015--2025
Wellington, 3 September 2015 --
In a new report launched today, New Zealand has an estimated US$7.52bn (13.7%) of GDP at risk from a series of manmade and natural threats over the next decade.
Those are the findings of new research for Lloyd’s, the world’s specialist insurance market.
The Lloyd’s City Risk Index 2015--2025 presents the first ever analysis of economic output at risk (GDP at risk) in 301 major cities from 18 manmade and natural threats over a ten--year period.
Based on original research by the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School, the Index finds that a total of US$4.6 trillion of projected GDP is at risk from manmade and natural disasters in these cities around the world.
Based on an analysis of Wellington and Auckland’s combined average annual GDP of US$57.4bn and as a result of the country’s exposure to the global economy as a major exporter of agricultural commodities, the country’s risk profile is dominated by manmade threats with market crash accounting for US$4.16bn or more than half of the total GDP at risk.
The combination of a lack of fossil fuel energy resources -- crude oil is the biggest import at around a tenth of the country’s total -- and being located a long distance from its fuel suppliers, oil price shock is the second most significant manmade threat.
Although manmade threats make up the majority of exposure, as you would expect there is significant GDP exposure to natural threats too given the location on the boundary between the Pacific and Australian tectonic plates.
Flood, volcano, earthquake and human pandemic account for 27% of the GDP at risk.
Globally, the Index identifies three important emerging trends in the global risk landscape: 1. Emerging economies will shoulder two--thirds of risk related financial losses as a result of their accelerating economic growth, with their cities often highly exposed to single natural catastrophes.
2. Manmade risks such as market crash, power outages and nuclear accidents are becoming increasingly significant, associated with almost half the total GDP at risk.
A market crash is the greatest economic vulnerability – representing nearly a quarter of all cities’ potential losses.
3. New or emerging risks, such as cyber--attack, are also increasingly significant.
Together, they account for more than a third of the total GDP at risk with just four – cyber--attack, human pandemic, plant epidemic and solar storm – representing more than a fifth of the total GDP at risk.
The findings show the need for governments and businesses to work together to build more resilient infrastructure and institutions.
How quickly a city recovers after a catastrophe is a key component of the total risk, and the impact of events is mitigated by rapid access to capital to help restore the economy.
Scott Galloway, Lloyd's General Representative in New Zealand said: “Lloyd’s City Risk Index highlights the economic risk exposure of our two major cities and the numbers reflect the strength of the economy, our reliance on external global forces, and our exposure to a number of natural threats.
Whilst recent experiences have significantly improved the understanding of insurance as a key to economic resilience, and the industry has continued to innovate with specialist insurance and reinsurance solutions we must continue to work together in partnership between the industry, business community and government to create a more resilient response to a major event.”
To access Lloyd’s City Risk Index 2015--2025 or to learn more about the Index and its methodology, visit www.lloyds.com/cityriskindex.
City--specific data can be downloaded as a PDF, which includes additional analysis for 50 priority cities.