Lloyd s City Risk Index Latin America

Lloyd s City Risk Index Latin America

Lloyd s City Risk Index Latin America Overview 1 Cities 12 2 Threats 16 3 Resilience 28 References 31 Acknowledgements 32

Lloyd s City Risk Index 279 cities. 22 threats $546.5bn at risk The Lloyd s City Risk Index measures the GDP@Risk of 279 cities across the world from 22 threats in five categories: finance, economics and trade; geopolitics and security; health and humanity; natural catastrophe and climate and technology and space. The cities in the index are some of the world s leading cities, which together generate 41% of global GDP. The index shows how much economic output (GDP) a city would lose annually as a consequence of various types of rare risk events that might only take place once every few years, such as an earthquake, or from more frequently occurring events such as cyber attacks. GDP@Risk is an expected loss figure in other words it is a projection based on the likelihood of the loss of economic output from the threat. The resilience levels of each city are taken into account, including the city s governance, social coherence, access to capital and the state of its infrastructure. If some or all of these are resilient they can reduce the overall expected loss. One way of thinking about GDP@Risk is as the money a prudent city needs to put aside each year to cover the cost of risk events. The concept of GDP@Risk helps policymakers, businesses and societies understand the financial impact of risk in their cities, a first step to building greater resilience. The index also shows the scenario costs these are the one-off costs if a specified threat scenario takes place. The index shows two numbers: the lower total is the loss that would occur from a moderate-sized event of that threat category; the higher total is the loss from an extreme scenario. These numbers represent the amount of lost economic output from the city from these types of scenarios. If occupants of the city hold insurance that covers property damage and business interruption, then some of the economic losses would be compensated from claims payments on these policies.

Global overview 279 cities. 22 threats Top ten cities at risk 1. Tokyo $24.31bn 2. New York $14.83bn 3. Manila $13.27bn 4. Taipei $12.88bn 5. Istanbul $12.74bn 6. Osaka $12.42bn 7. Los Angeles $11.56bn 8. Shanghai $8.48bn 9. London $8.43bn 10. Baghdad $7.91bn Top ten threats 1. Market crash $103.33bn 2. Interstate conflict $80.00bn 3. Tropical windstorm $62.59bn 4. Human pandemic $47.13bn 5. Flood $42.91bn 6. Civil conflict $37.15bn 7. Cyber attack $36.54bn 8. Earthquake $33.96bn 9. Commodity price shock $20.29bn The index s key finding is that $546.50bn is at risk each year from all 22 threats, in all 279 cities. The largest threats globally 1 are: market crash ($103.33bn), interstate conflict ($80.00bn) and tropical windstorm ($62.58bn). Man-made threats account for 59% of the total GDP@ Risk and climate-related risks account for $122.98bn of lost GDP a sum that will grow as extreme events increase in frequency and severity. The three cities which stand to lose the most GDP through risk worldwide are Tokyo ($24.31bn), New York ($14.83bn) and Manila ($13.27bn). The ten cities with the highest exposure could together lose $126.82bn per annum, almost a quarter of the total GDP@Risk in the index, with Tokyo standing to lose more than any other city. Asian cities stand to lose the most GDP to risk, accounting for $241.28bn or 44% of the global total, with tropical storm the costliest single risk at $59.14bn. North American cities can expect to lose $92.96bn each year and European cities, $70.33bn. In both regions, market crash is the single costliest risk. Cities in the Middle East and Africa will lose $97.20bn of their GDP, with interstate conflict the costliest risk. Latin American cities make up less than 10% of the global total with $44.73bn of GDP@Risk. The index ranks each city with a resilience score from very strong to very weak. A higher resilience score reduces the GDP@Risk. If every city in the index were to upgrade their resilience to very strong, the amount of GDP@Risk would reduce by $73.4bn. 10. Sovereign default $17.97bn

Latin American overview 31 cities. 22 threats The index analyses 31 cities in Latin America. How do they compare with other cities across the globe? Latin American cities account for just 8% of the global total GDP@Risk, in part due to their lower GDP levels. However, the continent still stands to lose $44.73bn each year to risk, with 35% of its exposure coming from natural causes, such as earthquake, and 65% from man-made risks, particularly civil conflict, social unrest and sovereign debt. Mexico City, Sao Paulo, Buenos Aires and Lima combined account for $23.15bn of GDP@Risk more than half of Latin America s expected loss. Overall, Latin America faces 11 risks with a cost of more than $1bn. The largest risk, in terms of impact on GDP, is market crash which the index estimates at an annual cost of $15.29bn. Climate risks account for $6.02bn, so the prospect of more extreme weather events caused by climate change needs to be carefully managed by Latin American societies. The index shows that civil conflict is a significant threat to GDP. Its impact on the economy, in terms of loss to productivity and business confidence, could hamper growth and slow down recovery post disaster. As the continent increases its global economic power, the need to tackle wealth inequality becomes more urgent. The challenge will be to achieve this without increasing national debt still further the index shows the risk of sovereign default poses a threat to the economies of several Latin American cities. The index also shows that cyber attack, while a growing global threat, could cause relatively low losses to GDP compared with other cities in other continents. However, as digital commerce grows this could change, meaning Latin American governments have an opportunity today to build resilient digital economies for the future. Several Latin American cities stand to lose GDP from volcanic eruption due to the number of volcanoes in the Andes. The level of resilience to natural catastrophe across the continent is mixed, particularly in relation to earthquake. For example, some higher income countries are more rigorous at enforcing earthquake-resilient building codes, while others are less so, exposing their cities to a higher risk of loss. Flood is another issue that threatens economic growth in many Latin American cities, where inadequate drainage makes neighbourhoods vulnerable to flash floods and landslides. Improving infrastructure can be a challenge, particularly in fast-growing cities, but doing so is vital to protect both people and local economies from the impact of disruptive events. Latin America is less resilient to disasters because it has relatively low levels of insurance throughout the continent. A 2012 report by Lloyd s showed that Brazil, Mexico, Colombia and Chile were underinsured collectively by more than $20bn. In other words, that s the amount of money governments would have to find from public funds to recover from disasters.

Latin America at a glance Top ten cities at risk Top ten threats 31 Latin American cities stand to lose $44.73bn per year to risk. The costliest threats are market crash, earthquake and civil conflict. Social unrest and civil conflict will cost Latin American cities more than flood and storm combined. 1. Mexico City $7.78bn 2. São Paulo $6.54bn 3. Buenos Aires $4.94bn 1. Market crash $15.29bn 2. Earthquake $4.75bn 0 5 10 15 20 65% of Latin America s total GDP@Risk is man-made. 35% is from natural causes. 4. Lima $3.88bn 3. Civil conflict $4.51bn Improving resilience could save the continent $6.7bn annually. 5. Rio De Janeiro $2.72bn 4. Sovereign default $3.59bn 6. Bogotá $2.12bn 5. Human pandemic $3.10bn 6. Tropical windstorm $2.89bn 7. Santiago $1.99bn 7. Flood $2.57bn 8. Santo Domingo $1.91bn 8. Volcano $1.62bn 9. Guadalajara $1.69bn 9. Social unrest $1.31bn 10. Brasília $1.29bn 10. Interstate conflict $1.30bn

Top ranked cities 1. Cities 12 Fig 2. Top five Latin American cities at risk ($US billion) City by risk GDP@ Global Costliest ranking Risk ranking threat 1. Mexico City $7.78bn 11 Market crash 2. São Paulo $6.54bn 13 Market crash 1. Cities These cities are regional, and in some cases global, centres of commerce and their high GDP contributes to their high ranking in the index. However, it also means their economies will lose more in dollar terms if a catastrophe happens. Mexico City tops the ranking for Latin America, with an expected loss of $7.78bn. It has the 11th highest exposure in the index s global rankings. Mexico City is characterised by its exposure to a wide range of risks, both manmade and natural. 3. Buenos Aires $4.94bn 29 Market crash 4. Lima $3.88bn 39 Earthquake 5. Rio De Janeiro $2.72bn 56 Market crash An ancient city, Mexico City was originally built on an island in a lake. Much of the city now sits on the lake bed, rendering it highly liable to flood. The soft clay also means the city is vulnerable to a wide range of seismic activity. In 1985, a quake of 8.0 magnitude caused the death of 5,000 people and estimated losses of $3-4bn. Exactly 32 years later, in 2017, mere hours after a commemoration of the 1985 tragedy, another quake hit the city, resulting in 228 deaths. However, earthquake ($0.43bn) is only the sixth costliest risk for the city. Two other natural catastrophe risks are expected to have a greater impact. Mexico City is just 45 miles from Popocatépetl, an active volcano, which erupted three times in January 2018, triggering a warning to residents to prepare for possible evacuation. The index shows Mexico City has the second highest GDP@Risk from volcano ($0.85bn) of the 279 cities analysed. Civil conflict is expected to cost the city $0.88bn each year. Mexico s position between the US and the drug-producing areas of Latin America has created powerful criminal cartels, and their activity, along with civil unrest fuelled by poverty, reduces the city s productivity. Mexico City has been a regional power for 700 years. The largest city in the Western hemisphere, it is poised to become an international powerhouse as the Mexican economy grows. Its challenge is to continue to adapt to its natural catastrophe risks which climate change will likely exacerbate to protect both its population and its growing wealth. Rising prosperity is likely to be the most effective long-term cure for social and civil unrest. This is also true for São Paulo in Brazil, which is second in the index s Latin American rankings, with a total expected loss of $6.54bn. Brazil s largest city shares much of Mexico City s risk profile, with poverty and drug cartels leading to loss through civil unrest. It is not, however, at risk from earthquakes, volcanos or tropical windstorm.

31 Latin American cities stand to lose $44.73bn per year São Paulo Top three risks Market crash $2.98bn Civil conflict $0.83bn Sovereign default $0.82bn Mexico City Top three risks Market crash $2.71bn Tropical windstorm $1.23bn Civil conflict $0.88bn Lima Top three risks Earthquake $1.40bn Market crash $1.03bn Interstate conflict $0.43bn 1. Cities 14 1. Cities Fig 3. Three cities in Latin America (US$ billion) Mexico City São Paulo Lima GDP@ $7.78bn $6.54bn $3.88bn Risk Global 11 13 39 ranking Top five Market crash Market crash Earthquake threats ($2.71bn) 4 ($2.98bn) 2 ($1.40bn) 8 by $ (with global rank) Tropical windstorm Civil conflict Market crash ($1.23bn) 16 ($0.83bn) 15 ($1.30bn) 61 Civil conflict Sovereign default Interstate conflict ($0.88bn) 12 ($0.82bn) 2 ($0.43bn) 42 Volcano Flood Civil conflict ($0.85bn) 2 ($0.59bn) 13 ($0.36bn) 27 Human pandemic Human pandemic Human pandemic ($0.48bn) 19 ($0.46bn) 22 ($0.24bn) 61 Financial risks, in particular market crash ($2.98bn) and sovereign default ($0.82bn) appear in its top five costliest risks. Globally, it is second out of 279 in the global rankings in the index for both these risks. Brazil is emerging from a severe depression, which has brought its sovereign debt (it is forecast to borrow $180bn in 2018 2) into focus. However, with the disruption caused by presidential elections (2018), the political climate might make it difficult to reduce the national debt. Lima s high ranking in the index is due to its vulnerability to earthquake, which is expected to cost the city $1.40bn annually from the rare events that will take place from time to time. Another critical factor is an expected loss of $0.43bn through interstate conflict Peru and Ecuador experienced a three-year war in the 1990s over territorial disputes and, in 2017, Peru recalled its Ecuadorian ambassador over a border dispute.

In Latin America $19.64bn is at risk from finance, economics and trade threats 2. Threats 16 2. Threats. Finance, economics and trade Fig 4. Latin America: finance, economics and trade threats ($US million) Finance, economics and trade ($US million, global rank) Market crash Commodity price Sovereign default shock Top five São Paulo $2981m (2) São Paulo 162m (38) São Paulo $822m (2) ranked Mexico City $2714m (4) Buenos Aires $135m (44) Buenos Aires $643m (4) Latin Buenos Aires $1800m (10) Santiago $123m (47) Rio De Janeiro $347m (7) American Rio De Janeiro $1280m (18) Rio De Janeiro $70m (85) Brasilia $179m (20) cities Lima $1026m (22) Santo Domingo $48m (109) Belo Horizonte $150m (24) $15.29bn Market crash accounts for just under a third of Latin American cities overall expected loss Market crash ($15.29bn) accounts for just under a third of Latin American cities overall expected loss. Three cities appear in the index s global top ten. Sovereign default also poses a substantial threat to economic growth. São Paulo, Buenos Aires and Rio de Janeiro are all in the index s global top ten ranking. Four Latin American cities are in the global top 20 cities the index analyses3. Sovereign default can have a ruinous impact on national economies. For example, after Argentina defaulted on its national debt in 2001, inflation and unemployment rose, with almost half of Argentinians living in poverty by 2003. The then finance minister described the default as a tragedy 4. Caracas, the Venezuelan capital, faces a substantial threat from sovereign default - the index shows $128m of GDP is at risk. In 2017, the rating agency Standard & Poor s announced Venezuela was in default 5.

In Latin America $12.39bn is at threat from natural catastrophe and climate risks 2. Threats 18 2. Threats. Natural catastrophe and climate One in three Latin American cities in the index has a higher GDP@Risk from a natural catastrophe than to any other threat. The most costly of these threats in the region is earthquake, with a predicted loss of $4.75bn for 20 countries. Lima, Bogota and Santiago stand to lose the most GDP, with Mexico City also vulnerable. Cities with smaller economic output, such as Quito in Ecuador and Guatemala City, also experience earthquakes that have serious economic impacts. Natural catastrophe is the biggest threat to GDP in a third of cities Earthquake loss both human and economic can be mitigated. Two Latin American cities demonstrate this. In January 2010, a quake, measuring 7.0 in Port-au-Prince, Haiti killed 220,570 people. A month later, the Maulé earthquake struck near Santiago, Chile. It was one of the strongest earthquakes ever recorded, at 8.8 magnitude. It killed 525 people. A combination of monitoring, early warning systems and, critically, strong building codes meant the human cost was reduced. The economic consequences of the two earthquakes were markedly different. Eight years on, Haiti continues to rebuild broken infrastructure, whereas in Chile 95% of the US$8.5 billion insured losses were ceded to the international reinsurance market, allowing the local community to recover remarkably quickly. Although earthquakes continue to kill thousands and devastate local economies, governments have the ability to markedly reduce their impacts. The second most costly threat in this category is tropical windstorm. Despite only six cities in the index (Mexico City, Santo Domingo, Guadalajara, Havana, Puebla and Port au Prince) being affected by the Gulf of Mexico storms, tropical windstorm could still cost Latin American cities $2.89bn each year. Forty two per cent ($1.23bn) of that loss total comes from Mexico City. Most of Latin America s larger cities with the exception of Mexico City are situated away from volcanos. However, several smaller cities live with the threat of an eruption from the chain of volcanos that run along the Andes. Guatemala City (Guatemala); Quito (Ecuador); Managua (Nicaragua) and San Salvador (El Salvador) are in the top five global rankings in the index for loss by share of GDP from volcano eruptions. When Cotopaxi volcano, 50km from Quito, erupted in 2015, it was estimated that 325,000 people could be at risk 6. Flood, and its associated risks such as landslide, is a threat for many Latin American cities, particularly in Brazil. At least 200 residents of Rio de Janeiro died following high rainfall in 2010 7 and, as a coastal city, sea surge is also a threat. The Government faces a major task to improve water drainage and strengthen landslide-prone neighbourhoods. Salvador, in Brazil, has experienced more than 19,000 landslides over the past decade 8. Several Latin American cities are exposed to drought. In 2015, Sao Paulo s main reservoir fell below 4% capacity, and in 2017, it was 15% under capacity, a situation the UN blamed on lack of proper planning and investments. Other cities face similar challenges. A fifth of Mexico City s inhabitants about four million people - have running water for only part of the day. The city imports 40% of its water, but could reduce this by investment in water management for example, by recycling wastewater and preventing leakage 9.

Fig 5. Latin America: natural catastrophe and climate threats 2. Threats 20 Natural catastrophe and climate ($US million, global rank) Latin American cities Flood Drought Heatwave Earthquake Volcano Tropical windstorm São Paulo Mexico City Mexico City Lima Mexico City Mexico City $593m $114m $13m $1396m $849m $1229m (13) (22) (34) (8) (2) (16) Mexico City Buenos Aires Lima Bogota Santiago Santo Domingo $420m $105m $5m $576m $274m $733m (22) (26) (80) (15) (17) (21) Buenos Aires São Paulo Guadalajara Santiago Quito Guadalajara $320m $63m $2m $534m $111m $508m (36) (49) (112) (17) (5) (30) Rio De Janeiro Bogota Puebla Santo Domingo Bogota Havana $198m $33m $0.8m $491m $100m $303m (59) (70) (134) (20) (19) (34) Santiago Rio de Janeiro Tijuana Mexico City Puebla Puebla $198m $27m $0.7m $428m $56m $81m (60) (82) (135) (24) (26) (39)

Fig 6. Latin America: technology and space threats 2. Threats 22 Technology and space ($US million, global rank) Top ranking Latin American cities Cyber Nuclear Power attack accident 10 outage São Paulo São Paulo Mexico City $343m $6m $96m (24) (37) (10) Mexico City Buenos Aires Buenos Aires $170m $5m $87m (67) (40) (14) Rio De Janeiro Rio De Janeiro São Paulo $147m $3m $78m (72) (10) (22) Brasilia Puebla Rio De Janeiro $74m $0.4m $34m (114) (96) (67) Belo Horizonte Santiago $63m $31m (126) (74) 2. Threats. Technology and space Latin America is currently less exposed to technology and space threats than other regions. Power outage is the exception. In 2017, an outage in Central America left five million people in Costa Rica without power for five hours. It also affected two million people in Panama as well as impacting Nicaragua and El Salvador, which are connected to the same grid. The GDP@Risk from power outage in Latin America is $0.55bn every city included in the index can expect a loss from this threat. Power outage is connected to other threats in the region. Mexico has experienced power cuts following storms and Buenos Aires has lost power due to flood and heatwave. Latin America is currently less exposed to technology and space threats than other regions

Fig 7. Latin America: geopolitical and security threats 2. Threats 24 Geo politics and security ($US million, global rank) Top ranking Latin American cities Civil Interstate Social Terrorism conflict conflict 11 unrest Mexico City Buenos Aires Buenos Aires Santiago $878m $802m $604m $91m (12) (22) (2) (4) São Paulo Lima São Paulo Lima $833m $432m $144m $81m (15) (33) (5) (33) Lima Quito Mexico City Mexico City $362m $66m $131m $73m (27) (37) (8) (37) 2. Threats. Geopolitics and security Civil conflict and social unrest are expected to cost Latin American cities $5.81bn a year: more than flood and storm combined. Civil conflict, with a $4.51bn total could cost only marginally less than earthquake. These threats are fuelled by poverty inequality and drug cartels. As Latin America s cities have grown, so have its informal settlements. This is not unique to this continent. The World Bank estimated that 880m residents lived in informal settlements in 2011 an 11% growth since 2000. The International Monetary Fund believes 53% of countries have seen a rise in wealth inequality in the past three decades, and the World Economic Forum s 2018 survey of business leaders identified rising income and wealth disparity as the third most important risk facing economies today. The favelas of Latin America are home to large numbers of people - some 250,000 people live in informal settlements in Buenos Aires, for example. Favelas are seen as outside government control and hence have become incubators of criminal groups and social isolation. Rio De Janeiro Rio De Janeiro Bogota $345m $62m $60m (29) (19) (40) Bogotá Lima Medellin $267m $50m $23m (39) (25) (65) Civil conflict and social unrest damage the economy. Prolonged widespread rioting decreases consumption and disrupts economic supply, impacting GDP growth. The largest cities in Latin America Mexico City and São Paulo are the most affected by civil conflict standing to lose a combined $1.71bn. The largest cities in Latin America stand to lose a combined $1.7bn to civil conflict

Fig 8. Latin America: health and humanity threats 2. Threats 26 Health and humanity ($US million) Human pandemic Plant epidemic Mexico City São Paulo $481m $47m (19) (46) 2. Threats. Health and humanity The spread of the Zika virus in Latin America in 2016 and the outbreak of swine flu in 2009 attracted global headlines. The World Bank estimated the short-term cost to the region of the Zika virus alone as $3.5bn 12. São Paulo Mexico City $456m $43m (22) (52) Buenos Aires Rio De Janeiro $320m $20m (43) (84) Lima Buenos Aires $239m $20m (61) (86) Pandemic is a threat faced by all regions but is greater in cities with high population densities and with strong transport routes to other regions, both of which enable pandemics to spread faster. For this reason, Latin America s largest cities are the most vulnerable in the index. In 2017, Time Magazine reported that the number of new diseases per decade has increased nearly fourfold over the past 60 years and warned that the world is not prepared for the next pandemic, citing the fact that vaccines make up just 3% of the global pharmaceutical market (worth $1trn) 13. Santiago Lima $212m $16m (72) (98) Latin America s largest cities are the most vulnerable to pandemic in the index

Fig 9. Latin America: resilience rankings 3. Resilience 28 Strong 3% Moderate 48% Weak 39% Very weak 10% If every Latin American City was to maximise its resilience rank, it could save the regional $6.7bn 3. Resilience Of the 31 cities the index analyses in Latin America, one (Buenos Aires) is categorised as having strong levels of resilience. Fifteen are classified as having moderate levels, including all Brazilian cities. Twelve are classified as weak, including all Mexican cities. Three receive the lowest grading of very weak Port au Prince, Medellin and Guatemala City. No Latin American city is classified in the index as having very strong levels of resilience. However, if all the Latin American cities included in the index were to achieve this rating, the continent would save $6.7bn. If the continent is to capitalise on its growth potential (which, despite recent economic setbacks in some economies, remains considerable) it must ensure that city GDP is protected against $44.72bn of GDP@ Risk. This is the sum governments in Latin American (covered by the index) should retain annually in savings to cover the consequences of risks. In a time of fiscal austerity, with several cities and states heavily indebted, this is challenging. However, some of the cities in the index account for high levels of national GDP; indeed they are engines of it, creating a critical dependency. Santiago, for example, accounts for 40% of Chile s output. In other words, if these major cities are impacted by disruptive events, the whole country suffers. This shows the imperative of investing in resilient infrastructure. As the GDP of Latin American cities rises so, inevitably, will their position in the index s GDP@Risk rankings. This does not mean more risk is inevitable. For a great many perils, with earthquake as a clear example, the knowledge and technology currently exists to drastically reduce death tolls and economic consequences. Climate change will inevitably increase the risk of flood and drought, and will require adaptive measures to strengthen urban communities. Tackling poverty could reduce the risk of civil conflict, social unrest and other violence that could harm economic growth. Risk can be mitigated, GDP levels can be protected and future generations can be made safer in Latin America.

Business, governments and insurers have a collective responsibility to build resilience 3. Resilience 30 3. Resilience. Stronger infrastructure An important measure that city officials could take to protect cities in Latin America is to invest more heavily in resilient infrastructure. Cities are growing at an unprecedented rate and are now home to the majority of the world s population, jobs, and GDP. Yet many growing cities are hampered by ageing infrastructure. Many Latin American cities have seen an explosion in their population - Brazil s population has grown from 72m in 1960 to more than 200m today, for today. Many people are choosing to live in urban environments - in 1960, 44.8% of Brazilians lived in cities, by 2000, 80% did. This rapid population growth has put a strain on infrastructure and led to heightened risk of flood, drought and landslide as well as contributed to increased unrest as cities expand onto more marginal building land. Investment in infrastructure won t eliminate or reduce every risk but the index shows policymakers could factor the benefits of greater resilience into the cost justification for greater infrastructure expenditure. Business, governments and insurers have a collective responsibility to build resilience. Cities are made up of a diverse and complex mix of institutions, ecosystems, assets and infrastructure that are connected and mutually interdependent. Disruption to one part of the system - utility and transport networks, communications systems and water supplies, for example can cause failure in other parts, with far reaching local and global implications. Next steps Strengthen infrastructure. Earthquake-prone cities should have strong and well enforced building codes in place. Water run-off and drainage should be improved in cities liable to flood and landslide Reduce budget deficits to sustainable levels Increase insurance levels to ensure city and state treasuries are not overburdened following disasters Develop strategies to combat wealth inequality, and use economic growth to develop routes out of poverty In 2017, we published a series of reports on how cities can build resilient infrastructure. It can be read here www.lloyds.com/futurecities

References 31 References 1 When the term global is used it refers only to all cities in the index, not all cities in the world many of which were not analysed by the index. 2 S&P Global https://www.capitaliq.com/ciqdotnet/creditresearch/renderarticle. aspx?articleid=1997483&sctartid=449034&from=cm&nsl_ code=lime&sourceobjectid=10442188&sourcerevid=3&fee_ind=n&exp_date=20280223-19:27:10 3 https://www.economist.com/news/finance-and-economics/21731845-important-reform-will-do-somethingtrim-fiscal-deficitbut-not?zid=305&ah=417bd5664dc76da5d98af4f7a640fd8a 4 https://www.washingtonpost.com/news/worldviews/wp/2015/07/01/map-greece-isnt-the-first-nation-todefault-on-a-sovereign-debt/?utm_term=.92d514ecd93b 5 https://www.ft.com/content/88bc3246-c8f4-11e7-ab18-7a9fb7d6163e 6 http://www.bbc.co.uk/news/world-latin-america-33972731 7 https://www.theguardian.com/world/2010/apr/08/rio-landslide-brazil 8 http://www.100resilientcities.org/cities/salvador/ 9 http://www.bbc.co.uk/news/world-42982959 10 Only these four cities are projected to lose GDP through Nuclear Accident 11 Only three Latin American cities are projected to lose any GDP through Interstate Conflict 12 World Bank 2016 http://www.worldbank.org/en/news/press-release/2016/02/18/world-bank-provides-150- million-to-combat-zika-virus-in-latin-america-and-the-caribbean 13 http://time.com/magazine/us/4766607/may-15th-2017-vol-189-no-18-u-s/

Acknowledgements 32 Acknowledgements About Lloyd s Lloyd s is a global specialist insurance and reinsurance market. Under our globally trusted name, we act as the market s custodian. Backed by diverse global capital and excellent financial ratings, Lloyd s works with a global network to grow the insured world building resilience of local communities and strengthening global economic growth. With expertise earned over centuries, Lloyd s is the foundation of the insurance industry and aims to be the future of it. Led by expert underwriters and brokers who cover more than 200 territories, the Lloyd s market develops the essential, complex and critical insurance needed to underwrite human progress. Disclaimer This report has been produced by Lloyd s for general information purposes only. While care has been taken in gathering the data and preparing the report, Lloyd s does not make any representations or warranties as to its accuracy or completeness and expressly excludes to the maximum extent permitted by law all those that might otherwise be implied. The views expressed in the paper are Lloyd s own. Lloyd s accepts no responsibility, and shall not be liable, for any loss which may arise from reliance upon the information provided. No responsibility or liability is accepted by the Society of Lloyd s, the Council, or any Committee or board constituted by the Society of Lloyd s or the Council or any of their respective members, officers, or advisors for any loss occasioned to any person acting or refraining from action as a result of any statement, fact, figure or expression of opinion or belief contained in this document or communication. This report does not constitute advice of any kind. Lloyd s 2018 All rights reserved About Cambridge Centre for Risk Studies The Centre for Risk Studies is a multidisciplinary centre of excellence for the study of the management of economic and societal risks. The Centre s focus is in the analysis, assessment, and mitigation of global vulnerabilities for the advancement of political, business and individual decision makers. The Centre provides frameworks for recognising, assessing and managing the impacts of systemic threats. The research programme is concerned with catastrophes and how their impacts ripple across an increasingly connected world with consequent effects on the international economy, financial markets, firms in the financial sectors and global corporations. To test research outputs and guide new research agendas, the Centre engages with the business community, government policy makers, regulators and industry bodies. Cambridge Centre for Risk Studies Disclaimer The views contained in this report are entirely those of the research team of the Cambridge Centre for Risk Studies, and do not imply any endorsement of these views by the organisations supporting the research, or our consultants and collaborators. This report is not intended to provide a sufficient basis on which to make an investment decision. The Cambridge Centre for Risk Studies develops hypothetical scenarios for use in improving business resilience to shocks. These are contingency scenarios used for what-if studies and do not constitute forecasts of what is likely to happen. The results of the Cambridge Centre for Risk Studies research presented in this report are for information purposes only. Any commercial use will require a license agreement with the Cambridge Centre for Risk Studies.

Acknowledgements 33 Acknowledgements Key contacts Trevor Maynard Head of Innovation trevor.maynard@lloyds.com For general enquiries about this report and Lloyd s work on emerging risks, please contact innovation@lloyds.com Acknowledgements Cambridge Centre for Risk Studies Simon Ruffle, Director of Research & Innovation Dr Andrew Coburn, Director of the Advisory Board Jennifer Copic, Research Associate Professor Daniel Ralph, Academic Director Dr Michelle Tuveson, Executive Director Jessica Tsang, Research Assistant Dr Andy Skelton, Senior Risk Researcher Further thanks go to the following for their expertise, feedback and assistance with the study: Data analysis & text provided by Fiona Sinclair Editor Flemmich Webb, Senior Manager, Strategic Communications, Lloyd s Design Zach John Design Picture credits Map tiles by Stamen Design, under CC BY 3.0. Data by OpenStreetMap, under ODbL.