Volcanic eruptions could cost large cities up to $30 billion: Swiss Re
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More than a billion people and $30 billion in economic activity are exposed to volcano risks, according to a Swiss Re Ltd. model.
Swiss Re on Thursday said it has developed a global volcano model that assesses risks in over 500 active volcanoes. The model enables insurers to quantify volcanic risks and to calculate expected losses from volcanic eruptions, the reinsurer said in a statement.
Quantifying volcanic risks can help cities and countries prepare for the worst, Swiss Re said, noting that one in seven of the world's largest urban areas, encompassing over 1 billion people, are located within a 150-km (93-mile) radius of an active volcano and some of the largest cities are at risk of total economic losses of up to $30 billion.
The top 10 exposed cities include Tokyo, Naples, Manila, Managua and Jakarta, Swiss Re said.
In some countries, the volcanic threat constitutes a substantial part of the insurable risks, Swiss Re said, and the ability to assess and price such risks with precision is crucial. Only Iceland currently has compulsory volcano insurance; elsewhere, losses from volcanic eruptions are largely uninsured, creating a huge protection gap, Swiss Re said.
"As global urbanization gathers pace, the protection gap for volcanic hazards widens,” Jayne Plunkett, CEO of reinsurance Asia at Swiss Re, said in the statement. “But economic disruption and large-scale economic losses for people and businesses locally are only one part of the picture. For example, in the case of any large-scale eruption, supply chains would be affected all around the world, causing both economic and insured losses."
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