Home / International / Insurers urged to work with cities to handle risks
12 October 2020
The insurance industry and cities around the world need to develop stronger, more effective working partnerships to better protect against political, cyber and economic risks and natural catastrophes, a new Lloyd’s report says.
Cities are still underinsured, according to the Cities at risk – Building a Resilient Future for the World’s Urban Centres report, which assesses how the insurance industry could be part of city risk management plans.
“It emerged that cities are mostly self-insured, and...insurers are facing cultural barriers as cities are not aware of the offers available and the benefits from purchasing insurance covers,” the report says.
“Cities’ risk managers and insurers should continue to work together in order to increase collaboration and understanding.”
Lloyd’s Head of Innovation Trevor Maynard says Lloyd’s can work with cities to help them understand their risks and exposures, and the insurance industry plays a big role in helping mitigate these risks and improve their resilience.
“The Lloyd’s market already has a lot of products meeting the needs of municipalities around the world, and we are working on products that target policyholders’ future needs,” he said. “Nevertheless, there is still a long way to go to develop further interactions between cities and insurers.”
Municipalities mainly self-insure the risks they face. The idea of transferring all
risks to third parties is not yet the norm in the public sector, the report says.
Insurance penetration rates are still low in most countries, and in developing economies customers have lower awareness of insurance products or the value of risk transfer.
Local authorities would like more clarity about insurance products in terms of coverages and pricing methodologies, while some processes such as tendering are preventing local authorities and insurers from collaborating over the long-term.
“Cities provide business opportunities for insurers as they tend to be more affluent and have more assets, people and liabilities that need protecting than rural zones,” the report says.
To realise this commercial opportunity, insurers and city officials should share data and analytics and improve cross-sector/industry learning and risk preparation.
The report identifies four main categories of threats facing cities: