A stock-market crash could erase as much as $170.3 billion from major cities’ gross domestic product in the U.S. and Canada and is the biggest threat to their economies, Lloyd’s of London said.
The losses, which represent about 2 percent of combined GDP for the 35 cities studied, surpassed estimates for the impact of natural disasters such as floods and earthquakes as well as terrorist attacks, the London-based insurance market said Thursday in a report.
A crash that large has happened five times globally in the past 50 years, including when the 1999 dot-com bubble burst and the financial crisis struck in 2008. Losses forecast in the analysis include supply-chain interruptions and declines in corporations’ revenue, according to the report, which was based on research by Cambridge University.
“Market crash puts the most GDP at risk globally — representing nearly a quarter of all cities’ potential losses,” Lloyd’s said. “Man-made threats are becoming increasingly significant.”
The report didn’t quantify what constitutes market crashes, other than to say they feature “extreme correlated mass movement of share prices.”
Oil-price shocks or a cyber attack, which could each cost more than $90 billion, were the next-biggest threats in North America, according to the report.
Market crashes, cyber attacks, power failures and nuclear accidents account for almost a third of GDP at risk worldwide, Lloyd’s said. Floods were the fourth-largest risk in North America, representing $76.8 billion of possible damage, while a human pandemic could wipe out $56.5 billion of GDP.