Vision that mega-cities nervous systems based on Internet; reality that locations will face nat-cat risk: Allianz SE

The mega-city is coming – with two-thirds of the world’s population expected to be city dwellers by 2030 – but this development poses challenges regarding how best to strike a balance between growth, quality of life and climate protection, cautions a report issued Monday by Allianz SE.

Many city dwellers by 2030 will, in fact, be living in mega-cities, “conglomerations with ten million inhabitants or more,” says Axel Theis, member of Allianz SE’s Board of Management responsible for global insurance lines and anglo markets.

Emphasizing the need to find answers to the enormous challenges posed, Theis states that “our main question is going to be, ‘How can we find the right balance between growth, quality of life and climate protection?”

There are currently 29 mega-cities – cities with more than 10 million inhabitants – and that number is forecast to grow to 41 by 2030, notes the latest Allianz Risk Pulse, The mega-city state: the world’s biggest cities shaping our future.

Compare that to 1950, when only New York and Tokyo exceeded a population of 10 million. As early as 2020, the greater Shanghai area could even become a “giga-city,” with 170 million inhabitants, notes a statement issued Monday by Allianz SE.

Among the drivers to growth are the prospect of jobs and a better infrastructure, which is currently attracting young people to urban areas.

Describing life in the mega-city of 2030 and exploring the role of insurance, the report notes that strong growth is anticipated, particularly in Asia and Africa.

The growth of megacities right now is primarily an Asian phenomenon, Jay Ralph, says Allianz SE’s member of the Board of Management responsible for global asset management. “Estimates indicate that the Asian middle class will grow to 1.75 billion by 2020. By the end of 2014, 11% of our assets under management for customers originated in this region. The percentage is expected to increase further,” Ralph points out.

The report notes that the nervous system of the envisioned Smart City will be based on the Internet. With that, electricity, transportation and supply and disposal systems will all be electronically linked.

“Buildings will produce their own electricity and even store it, for example, using high-powered battery storage systems. This will result in a decentralized energy-generation and storage system, which will have the additional benefit of mitigating the impact of power outages,” Allianz notes.

“Automatic traffic control systems will respond to real-time data, reducing traffic and redirecting it if necessary,” the insurer reports. “The workplace and the home will merge. Supply chains will be optimized.”

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As well, though, “many of these cities are located in low-lying coastal regions, which are especially vulnerable to the effects of extreme weather and climate change,” the company cautions.

“As living conditions in large metropolises change, so do the needs of their inhabitants and we, as insurers, are going to have to meet them,” Theis says plainly. “With knowledge comes the responsibility to act, especially when it comes to managing risks such as natural catastrophes or climate change, and protecting and investing in critical infrastructure.”

At the same time, Allianz notes, “life expectancy is increasing in many regions of the world; above all in Asia. In 2030, 15% of the world’s population will be older than 60. This trend is also taking place in mega-cities.”

With more and more people living in smaller households in the mega-city of the future because the traditional family unit is becoming increasingly disbanded, the demand for living space will rise substantially. “This challenge can be countered with innovative technologies, such as 3D-printed houses,” suggests Allianz.

“The ideal city will be made up of many autonomous centres,” says Thomas Liesch of Allianz Climate Solutions, with people living and working in their respective districts. “Fewer cars mean more space for pedestrians and a network of green spaces will connect the individual neighborhoods. This sort of development would improve the climate and leave more space for leisure activities and food production,” Liesch envisions.