MUMBAI: The 26/11 attack on Mumbai might not have been on the same scale as New York’s 9/11. But Lloyd’s — the world’s oldest active insurance marketplace — believes that Mumbai tops the list globally in terms of economic output at risk ($8 billion) in the event of a terrorist attack. The city’s gross domestic product at risk (GDP@risk) due to terrorism is slightly more than Kabul ($7bn). What’s more, Mumbai and Delhi rank third and fourth in GDP@risk due to a power outage.

Lloyd’s City Risk Index is the first attempt to measure the economic output at risk in 301 cities from 18 man-made and natural threats over a decade.

In India the top cities in terms of GDP@risk are Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kanpur, Kolkata, Mumbai, Pune and Surat, which together will generate an average annual GDP of $1.4trillion in the coming decade. However, 12.6% of this economic growth is at risk from the combination of 18 man-made and natural threats.

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According to Lloyd’s the analysis assesses the threat to the cities in terms of how likely a large catastrophe of that threat type might be to affect the city over the next ten years. It includes assessments of how vulnerable the city might be to that scenario and the resilience of the city in bouncing back from that catastrophe. The amount of economic output lost is represented in the GDP@risk figure, which is an expected loss figure. The expected loss is arrived at by computing the value of an expected loss multiplied by the probability of the loss.

“In the case of New York, though it has higher value assets than Mumbai, its GDP@risk associated with terrorism is just $0.59bn compared to Mumbai’s $7.94bn. This is because New York is less vulnerable to a terrorist attack (eg., because of its advanced security and intelligence infrastructure) and its economy is more resilient thus better able to bounce back after a terrorist event should it take place,” Lloyd’s said.

The survey has some other interesting findings as well. While Mumbai, Delhi, Kolkata are the top three, Ahmedabad is a surprise in the fourth position due to the economy’s susceptibility to economic losses arising out of flood ($14bn). Bengaluru is much lower on the list at 10th position because the biggest threat to GDP is a pandemic ($1.8bn).

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Although Mumbai tops the list in terms of risk of terrorism to the economy, the biggest threat to the city’s output according to Lloyd’s is a human pandemic which could cause losses of $11.44bn followed by terrorism, market crash, flood and oil price shocks.

In terms of events, the biggest threat to economic output is a crash in stock markets which could wipe out $1 trillion followed by Human Pandemic ($591 bn) and Windstorm ($586bn). The top three cities in terms of GDP at risk are Taipei ($181bn), Tokyo ($153 bn) and Seoul ($103 bn). The city that is exposed to most threats is New York which is in the top five in nine of the 18 events which includes cyber risks, flood, freeze, heatwave, market crash, nuclear risks, oil price shock, power outage and solar storm.

According to Vincent Vandendael, director of global markets, Lloyds the ability of the economy to bounce back from a disaster is determined by the level of insurance penetration. “A one percentage point increase in insurance penetration reduces the taxpayer’s contribution to economic losses by 22%,” he said. Insurance penetration refers to the share of insurance premium to a country’s GDP. He added that in the US, where half of economic losses during a disaster are covered by insurance, over 60% of the risk is `exported’ outside the country through reinsurance.

The GDP at risk does not mean that the cities are risky. The measure aims to put a number to the economic loss that would be caused by catastrophic event after taking into account the GDP, the susceptibility and the preparedness of the city to tackle the event. According to Kent Chaplin, Lloyd’s head of Asia Pacific the GDP@risk numbers could be used as an indicator on how resources could be deployed.