As Japan this week dealt with a trifecta of natural phenomena — flood, earthquake and volcano — a recent survey has found that Tokyo’s high exposure to man-made and natural threats makes it the world’s second-riskiest city to live in after Taipei.
In a recent report, the Lloyd’s international insurance market says the likelihood of events occurring over the next 10 years means Tokyo risks a possible economic loss of $153.28 billion of its GDP.
The report, Lloyd’s City Risk Index 2015-2025, was developed with Cambridge University’s Center for Risk Studies to help governments and businesses highly exposed to catastrophic shocks better prepare.
It says that a “combination of high economic value and large potential economic losses from both natural and man-made threats” contributes to its high rank and makes it among “the most financially exposed in absolute terms.”
However, London-based Lloyd’s said that Tokyo’s exposure to potential loss is comparatively low and accounts for only 10.44 percent of its $1.47 trillion in estimated annual GDP, making it “one of the richest cities.”
The report puts Taipei at the top of the list, with the risk of suffering economic damage of $181.2 billion in the next 10 years. Seoul was third at $103.5 billion, followed by Manila at $101.09 billion and New York at $90.36 billion.
The total GDP risk for all 301 cities analyzed was estimated at $4.56 trillion.
“My hope is that this unique index can stimulate discussion — and, where appropriate, prompt innovation,” Lloyd’s CEO Inga Beale said.
Tokyo was selected from 5,000 cities with populations over 250,000 and with economic significance to global GDP.
Lloyd’s analyzed a risk assessment of 18 catastrophe threats with the potential to cause damage and disruption to social and economic systems and their impact on economic output based on records of natural and man-made catastrophes over the past 50 years.
The threats analyzed included an earthquake, flooding, human pandemic, volcano, tsunami and drought as well as a stock market crash, oil price shock, cyberattack, nuclear accident and terrorism.
According to Lloyd’s, Tokyo ranked second for volcanic eruption risk, third for heat wave, fourth for wind storms, referring to typhoons, and sixth for earthquakes.
Lloyd’s reported that natural threats make up the majority of its potential losses. According to researchers, an exposure to wind storms may bring Tokyo a loss of $29.06 billion, while exposure to earthquakes and flooding may trigger a loss of $18.83 billion and $17.65 billion.
Within Japan, the survey cited 13 cities, including Osaka, Nagoya, Yokohama, Sendai, Hiroshima and Kyoto.
Osaka ranked second in Japan and eighth in the world with a GDP loss risk of $79.32 billion, with wind storms the main risk factor at $18.45 billion.
Both Tokyo and Osaka were cited as examples of a combination of high economic value and high exposure to both natural catastrophes and man-made risks.
The Lloyd’s City Risk Index 2015-2025 can be found at jtim.es/SdSlj .