As more Canadians flock to major urban hubs, the concentration of assets, resources and economic drivers in Canadian metropolises is growing in intensity. Alongside this economic boom comes a whole range of exposures – both man-made and natural.
The latest Lloyd’s of London CityRisk Index reveals Toronto has the highest GDP@Risk in Canada, at $1.95 billion, compared to Montréal’s $1.12 billion and Vancouver’s $0.86 billion. The Index defines GDP@Risk as an expected loss figure based around a city’s exposure to 22 threats in five categories: finance, economics and trade; geopolitics and security; health and humanity; natural catastrophe and climate; and technology and space.
Approximately $546.5 billion is at risk across 279 cities worldwide, according to the CityRisk Index. The largest threats globally are: market crash ($103.33 billion), interstate conflict ($80 billion) and tropical windstorm ($62.58 billion). Man-made threats account for 59% of the total GDP@Risk and climate-related risks account for $122.98 billion of lost GDP.
“The Canadian city with the highest GDP@Risk is Toronto, which is 80th in the global rankings. Toronto’s two largest threats are man-made: a market crash and a cyber attack. Because of Toronto’s reliance on private capital, any market disruption would be impactful, similar to most North American and Western cities,” said Sean Murphy, president of Lloyd’s Canada. “We know Toronto is working diligently on resilience. They have a designated chief resilience officer and are taking the right steps to improve Toronto’s resilience.
“But the city cannot ignore the growing perils presented by man-made risks such as cyber attacks, which can rival natural catastrophes in their economic impact. These threats underscore the critical need for insurance coverage to protect against evolving man-made risks, as well as the urgent need for mitigation efforts to help businesses, governments and individuals prepare before a cyber threat even materializes.”
The greater the GDP, the more a city has to lose. Toronto is Canada’s economic capital and therefore tops the charts for man-made risks like market crash and cyber attack. Proactive risk mitigation and appropriate insurance coverage can vastly improve big cities like Toronto. The Lloyd’s CityRisk Index can help urban hubs identify and understand threats to their economy. It underscores the economic case for investment in more resilient infrastructure and mitigation efforts, along with increased global access to insurance.
“Insurance claims payouts are vital to recovery efforts – whether it’s providing funds for replacement equipment so that a business can get back up and running or bringing in forensic experts and PR specialists in the wake of a cyber hack – and we as insurers need to make sure the value of various coverage solutions is clear to all those that could benefit,” explained Murphy.
“Encouragingly, Toronto is already taking a number of proactive measures. For example, the city is a member of the 100 Resilient Cities network, pioneered by the Rockefeller Foundation, dedicated to helping cities around the world become more resilient to physical, social and economic challenges. As part of the 100 Resilient Cities effort the city is receiving funding and resources to support a chief resilience officer to coordinate, oversee, and prioritize resilience-building activities; the development of a comprehensive resilience strategy for Toronto; and opportunities to collaborate with the 100 Resilience Cities network of cities and experts.”
Not all perils have an insurance solution. Market crash has been named the dominant risk in Toronto, but no insurance product can replace lost equity value. Insurance, in this case, is part of a wider risk management strategy to help build resilience in Canada’s economic capital.