The Middle East’s 16 largest centres of economic growth could have $367bn of GDP at risk from a series of threats over the next decade, according to new research for Lloyd’s, the specialist insurance market.
Riyadh has the most GDP at risk from human pandemic in the region at $5.16bn, reflecting the flow of almost two million pilgrims who make Hajj each year.
In the financial trading hubs of Dubai and Abu Dhabi, market crash is the greatest exposure accounting for almost half of the GDP at risk.
Across the region, the largest GDP exposures are to market crash ($143.3bn), earthquake ($85.17bn), human pandemic ($41.40bn), sovereign default ($30.16bn), and terrorism ($25.68bn).
Tehran has the most GDP at risk with $64bn exposed; more than half of this ($34.5bn) is from earthquake, as the city lies on several major fault lines.
A new study published on Thursday, 03 September, 2015, titled Lloyd’s City Risk Index, presents an analysis of economic output at risk (GDP@Risk) in 301 major cities from 18 manmade and natural threats over a ten-year period.
In the Middle East, the Index found the cities of Abu Dhabi, Ahvaz, Amman, Baghdad, Beirut, Damascus, Doha, Dubai, Esfahan, Jeddah, Jerusalem, Karaj, Kermanshah, Kuwait City, Mashhad, Riyadh, Sana’a, Shiraz, Tabriz, Tehran, Tel Aviv-Yafo, and Qom, together will generate an average annual GDP of $2.4tn in the coming decade.
However, 15% of this economic growth is at risk from the combination of 18 manmade and natural threats.
Mark Cooper, Lloyd’s Middle East General Representative, said: “We are all too familiar with some of the natural threats and have robust contingency plans in place.
“However, we should be increasingly aware of a number of manmade and emerging threats highlighted in the report and the importance of risk management to mitigate the potential economic impact.
“The study shows that a market crash is the greatest economic vulnerability and this is also true in the Middle East, where $143bn could be at stake,” Cooper continued.Â
“Whilst insurance is part of the solution to improve resilience to these threats; and the industry continues to innovate with specialist (re)insurance coverage; government, business and communities must work together to create a more resilient response to a major event.”
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 $4.6tn of projected GDP is at risk from manmade and natural disasters in these cities around the world.
Lloyd’s has produced this Index to help increase the understanding of, and shape the world’s response to, the shifting risk landscape. The Index, which will be updated every two years, is aimed at stimulating further discussions between insurers, governments and businesses on the need to improve resilience, mitigate risk and protect infrastructure.
Globally, the Index identifies three important emerging trends in the global risk landscape:Â 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; manmade risks, such as market crash, power outages and nuclear accidents are becoming increasingly significant, associated with almost half the total GDP@Risk; and, new or emerging risks, such as cyber-attack, are also increasingly significant.
Inga Beale, CEO of Lloyd’s, said: “Insurers, governments, businesses and communities need to think about how they can improve the resilience of infrastructure and institutions.
“Insurance is part of the solution.”Â
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