Modern cities need modern insurance

Insurers need to carefully consider the changing coverage needs of cities as populations continue to grow and urbanisation globally continues unabated.

That was the key message of a workshop hosted by Lloyd’s at the annual Airmic conference taking place in Harrogate this week, called ‘Modern cities need modern insurance’.

James Burchill, innovation associate at Lloyd’s, explained that cities are increasingly complicated and interconnected places with vulnerabilities that need to be understood in a holistic way.

Graham Thrower, head of infrastructure and investment, Urban Foresight, described some of the detail of a project that the company is doing with Lloyd’s around gaining a better understanding of cities.

He explained that the company likes to be very outcome-based and help cities achieve change in real ways that make a difference.

The project will examine four themes: urbanisation, population growth, the changing nature of work, and the impact of political and social change. It will examine these in relation to seven cities: Mexico City, Johannesburg, London, Shanghai, New York, Riyadh and Miami.

Talking about the trend for urbanisation, Thrower noted that more than half of the world’s population now lives in urban areas—up from a third in 1950; this is projected to reach two-thirds by 2050.

He also noted that megacities with populations of 10 million+ will increase from 31 to 41 by 2030.

“These are the future powerhouses driving global gross domestic product (GDP),” he said.

“There is a positive association between urbanisation and GDP growth, although it is less so in the developing world because of poorer transport and infrastructure.”

Burchill explained some of the implications these trends have for insurers. He said that one of the biggest implications is that greater interconnectivity and reliance on technology potentially puts a strain on cities and has insurance implications if they go down.

“Networks are only as resilient as their weakest link,” he said. “Infrastructure items such as energy grids, data and water systems are going to be stressed as never before.

“Insurers need to be aware of this greater concentration of risk. You could be looking at claims in the billions if something goes down even for a short period.”

The report will likely be called Maturing Metropolis and should be out at the end of 2019 or early 2020.