Riskiest Cities in the World

San Franicisco skyline behind Golden Gate Bridge
Janet Kopper/Getty Images

Over three hundred cities around the world are vulnerable to a variety of natural and man-made threats. These threats could cause severe physical and financial losses, according to a report issued by the Cambridge Centre for Risk Studies. The report was published on behalf of Lloyd's of London. It is entitled "Lloyd's City Risk Index 2015-2025."

Importance of Cites

The Cambridge researchers focused on cities because of their importance to the global economy.

More people live in urban areas now than ever before. Cities are the main drivers of global economic growth. They produce most of the world's economic output.

Yet, cities are increasingly vulnerable to threats. For one thing, they have a high concentration of assets. Cities are centers of wealth, and a single event can have catastrophic consequences. Secondly, cities have become highly interdependent. A financial disruption in one city can have devastating effects on another.

The types of risks that threaten cities are evolving. For example, climate change has made many cities susceptible to floods and storm surge caused by rising seas. Cyber attacks and market crashes are growing risks for many cities, particularly those that are major financial centers.

Purpose of Study

The City Risk Index focuses on several key issues.

  • Which major cities are susceptible to disruptive threats? The researchers identified 301 cities that are significant producers of GDP. Each has a population of at least $250,000.
  • What are the major threats? The study focuses on 18 risks that threaten cities. The report provides a threat profile for each city, highlighting its key risks.
  • How would each threat impact each city's economic output? The researchers calculated the loss of economic output that each city would sustain as a result of each type of threat. They described the loss using the term GPD@Risk.
  • How do the cities compare? The researchers ranked the 301 cities according to their vulnerability to a catastrophic disruption. The six most vulnerable cities worldwide are Taipei, Tokyo, Seoul, Manila, New York and Los Angeles.

What are the Threats?

The 18 threats cited in the study are listed in the table below. Some are natural while others are man-made.

Natural ThreatsMan-made Threats
DroughtCyber attack
EarthquakeMarket crash
FloodNuclear accident
FreezeOil price shock
HeatwavePower outage
Human pandemicSovereign default
Plant epidemicTerrorism
Solar storm 
Volcano 
Windstorm 
Tsunami 

GDP@Risk

The study is based on the premise that each of the 301 cities produces a certain amount of economic output. Economic output is expressed in terms of gross domestic product (GDP). A catastrophic event will reduce a city's ability to general GDP. Moreover, GDP may not return to normal for several years. Thus, the researchers calculated GDP@Risk based on the reduction in GDP that is expected to occur within five years after an event. They then multiplied the expected loss by its probability.

For instance, suppose that a power outage in Houston is likely to generate a GDP loss of $10 billion.  Assume that there is a 10% probability that Houston will experience a power outage between 2015 and 2025.

Houston's GDP@Risk for a power outage is $10 billion X .10 or $1 billion.

Top 19 Riskiest Cities in the U.S.

RankCityGDP At Risk
1New York90.36
2Los Angeles90.32
3Chicago42.35
4San Francisco41.35
5Houston31.66
6Washington D.C.26.60
7Miami23.45
8Philadelphia19.43
9Atlanta16.61
10Boston16.30
11San Diego15.67
12Dallas15.67
13Seattle14.39
14Detroit14.00
15San Jose12.85
16Phoenix12.38
17Baltimore10.96
18Portland10.69
19Denver10.66

Based on the study, the two riskiest cities in the U.S. are New York and Los Angeles. Both have a high density of population, wealth, and assets. Both are major financial centers and large producers of GDP. The risks these cities face are similar but not identical. For instance, the top three risks for New York are market crash, oil price shock, and cyber attack. For Los Angeles, the top three risks are market crash, earthquake, and flood.

Is your business located in one of the world's 301 most vulnerable cities? You can find out by reviewing the City Risk Index yourself. The report is available at Lloyd's website.