Ten riskiest cities for natural disasters

Residents and businesses in Tokyo-Yokohama, Manila in the Philippines and the Pearl River Delta (Hong Kong, Shenzen, Dongguan, Macau and Guangzhou) in China are most exposed to the threat of natural disaster, according to new research by Swiss Re.

Seeking to address the current knowledge deficit on risk in metropolitan areas, the global insurance company conducted a natural disaster risk analysis of 616 cities around the world, which taken together, account for approximately 50% of global GDP. Researchers used modelling and hazard data to assess the potential impact that five perils – earthquake, storm, storm surge, tsunami and river flood – would have on local residents and the wider economy.

The study found that 379 million city dwellers worldwide live in areas at risk of river floods. Earthquakes pose a risk to another 283 million, while wind storms could potentially affect 157 million. Many cities and their residents face multiple hazards.

Looked at in terms of the size of the population likely to be affected, nine of the ten most exposed urban centres are located in Asia. The threat posed by flooding is particularly high in cities in China and India.

Japan is home to three of the cities at greatest risk. The country is particularly vulnerable to the impact of tsunamis as the majority of its cities are located on the active fault lines of the Western Pacific, known as the ring of fire. The Tokyo-Yokohama region tops the risk list as its 37.1 million residents live with the threat of earthquakes, monsoons, river floods and tsunami.

However, if the ranking is based on the potential impact of a natural disaster to a local economy, the focus of the top ten would shift westward to include Amsterdam-Rotterdam; Los Angeles, New York-Newark and San Francisco in the US; Paris; and Taipei, Taiwan. Swiss Re calculated this using an index of the value of working days that would be lost.

Wider implications

The UN estimates that 6.3 billion people, or 68% of the world’s population, will be living in urban areas by 2050, with the highest increase occurring in emerging economies. This trend towards the concentration of people, assets and infrastructure heightens the potential for losses in the event of a natural disaster. 

Natural catastrophes cause average economic losses of $60 billion to $100 billion each year, though losses incurred in a single large-scale disaster in a major urban centre can exceed this figure, according to the report. For instance, the March 2011 earthquake off the coast of Japan and subsequent tsunami caused total losses of an estimated $235 billion and is considered the costliest natural disaster in history.

To date, insured disaster losses in the US, Canada and Europe have been significantly larger than elsewhere as the practice of insuring urban assets is not yet widespread in emerging markets. In the coming decades, Asia is set to emerge as the region with the highest economic loss potential and the biggest gap between economic and insured losses.

—Samantha White (swhite@aicpa.org) is a CGMA Magazine senior editor.