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Lisbon could lose upwards of a billion dollars

Lisbon could lose upwards of a billion dollars
25.06.2018
MDS, a leading multinational insurance brokerage and risk consultancy firm of Portuguese origin, has just announced its status as a Lloyd's broker at an event in Lisbon. Lloyd's is the world's largest specialty insurance and reinsurance market. Out of all Portuguese-speaking countries, MDS is the sole broker than can operate directly in the world's foremost insurance and reinsurance market in London.

This history-making moment for the Portuguese financial sector brings new horizons to the national economy and companies with regard to risk exposure. 

Broker status at Lloyd's allows MDS direct access to one of the most important insurance and reinsurance markets of the world, which gathers a unique set of highly-specialized risk underwriters, held up by a solid financial rating and licensed to operate at the international level, covering more than 200 countries. Lloyd's is, today, the world hub for specialty insurance and reinsurance, and the market of choice for emerging risk, which by nature presents as less well-known and more complex. 


Financial market crash may drive risk to the city of Lisbon
The event to announce MDS as a Lloyd's broker in Lisbon included a presentation of the findings of a study on city risk, conducted by Lloyd’s in partnership with the University of Cambridge, analysing the impact of 22 risks on GDP in 279 of the world's key cities, which, as a group, generate 41% of the world's economic output. 

According to the study, Lisbon faces a potential wealth production loss in excess of a billion dollars. Potential loss from financial market crash is prominent in this context, estimated at 550 million dollars. 

Among the five main risk categories affecting the city of Lisbon, albeit at a lesser degree of severity, one counts flooding, cyber attacks, human pandemic and surges in the cost of raw materials.

The study goes on to highlight earthquake risk. Although the city is at low risk for earthquakes, should an earthquake happen, worst-case scenarios would lead to an estimated loss of 43.79 billion dollars.


Potential losses in wealth production total 546.5 million dollars
The study also reveals that potential wealth production loss worldwide for all cities surveyed is at an estimated 546.5 billion dollars. Man-made threats represent 59% of risk totals and natural threats account for 41% of potential losses. A market crash is the most significant, representing 103.3 billion dollars. Also of note is that climate-related risk on the whole represents 123 billion dollars.

Most risk is concentrated on a few cities — 10 cities make up one fourth of the loss amounts. Tokyo presents the largest potential loss in wealth production, estimated at 24.3 million dollars.

Per the study, titled Lloyd's City Risk Index, greater resilience can prevent losses of 73.4 billion dollars in cities.  Although no city can totally immunize itself from risk, the index shows that active risk management can minimize effects on GDP, and cities should employ preventative, risk mitigation measures.

Likewise, the City Risk Index reveals that insurance is a part of the solution, as it provides for capital injection after catastrophic events. In light of identified risks, insurance companies and brokers must invest on the development of new products, so as to respond to city needs, namely of their citizens and their economic and business communities.


Insuring specialized risk
MDS, established in 1984, is the leading insurance broker in Portugal, the fourth largest broker in Brazil and a major player in the Angolan market. Entering Lloyd's is a recognition of MDS's contribution to the insurance sector in terms of professionalism, attention to detail, sophistication, service and most of all innovation through several trailblazing initiatives both in Portugal and abroad.

Lloyd's, with its 300-year history, has lived through several world crises and always held on and reinvented itself, which makes it a leader in the field. Thanks to such resilience, Lloyd's has managed to rank sixth among the world's largest reinsurance groups and garnered third place in the AM Best ranking of the world's largest non-life reinsurance groups, having managed a premium total of 29.862 million pounds (34.059 million Euros) in 2016. 

Pooling the skills of these two organizations means that, be it in Portugal or wherever MDS has a presence, either directly or through Brokerslink, where it holds a stake, ever more innovative and customer-centric solutions can be delivered. The growing complexity of risk facing companies and economies today, be they climate risk, cyber risk or supply chain risk, demands increasingly sophisticated solutions which will now be channelled through this partnership.
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