More understanding of “megacity” risk needed: Munich Re

The world’s megacities face a host of unique risks which have not yet been fully understood, according to a study by Munich Re.
In its report to the United Nation’s World Conference on Disaster Reduction, Munich Re presented new research which shows that megacities are exposed not only to natural catastrophes but also technological, environmental and terrorist risks, and to greater dimensions, or “mega-risks”. Megacities include “conurbations” (a metropolis made up of several urban/suburban areas) with 10 million residents or more.
Insurers face a specific challenge in quantifying these complex risks, and Munich Re calls for greater transparency in terms of loss potential and liability. For governments, the massive potential losses associated with locating megacities in high-risk locales, such as coastal and earthquake-prone zones, must be assessed.
“The losses that may be caused by natural hazards, technological risks, terrorism and even epidemics must be identified and modeled in advance. This is the only way to ensure that the enormous range of megacity risks can be insured on a sustainable basis,” says Stefan Heyd, of Munich Re’s board of management.
On its list of 50 megacities, Munich Re has attached the greatest risk exposure to Tokyo, Japan, which faces high earthquake risk, moderate storm risks and even the potential for volcanic eruption. Los Angeles and San Francisco also place high on the list, much of this attributable to their high risk of earthquake, as was also the case with Kobe, Japan, where a 1995 earthquake remains the worst natural catastrophe in terms of economic losses at more than US$100 billion. The list, however, does not take terrorism risk into account.