Urbanisation is today’s dominant trend across our 21st-century changing world. Urbanisation occurs when the proportion of people living in towns and cities increases. Urbanisation occurs because people move from rural areas to urban areas. While urbanisation brings population density and new ways of ensuring growth, it also brings new sets of major challenges.
Throw in the impact of the pandemic, and now we need a whole new set of assumptions when it comes to population growth and the design of towns and large cities. Many cities offer an innovative – or ‘smart’ – approach to ensuring city resilience and technology has a big part to play in this too.
What is urbanisation?
Urbanisation refers to moving population growth from rural towns to metropolitan areas, allowing cities and towns to grow. This is also called progressive increases in the population living in towns and urban areas. The concept alters city life, village economic development, social mileage, socio-economic privileges and political decision making.
Let’s explore the evolution of urban cities. Nearly 15 years ago, we broke an urbanisation world record. In 2008, for the first time in history, half of the world’s population, or 3.3 billion people, lived in urban areas.
Today, 56% of the world population now lives in cities. The biggest change has been in Latin America and the Caribbean, with 81.2% of the population living in urban areas, up from 41.3% in 1950. Still, one-third of the worldwide urban population – or 1 billion people – currently live in slums.
By 2030, at least 61% of urban populations will live in cities and over 2 billion people in the world will be living in slums. And then, it is estimated that 68% of the total population will live in cities by 2050. As populations urbanize, access to reasonable living standards will become a major issue for the most vulnerable.
Of course, population shift creates risk in urban areas by increasing population numbers. Population shift also generates more significant pressure and results in greater exposure to hazards. But the inherent vulnerability here is maximized because of poor actions and decision making. Without risk mitigation techniques, urban disasters are more likely to arise and bring disastrous consequences, this means that when it comes to risks linked to growing cities, urban risks create heightened interest. As we operate in transitioning economies, the situation now is how to understand the challenges and opportunities urbanization brings and ways for us to mitigate the urban risks that come with it.
The 7 effects of urbanisation
Urbanisation doesn’t mean bad. It provides significant advantages on economic, cultural and social progress combined with conditions of modernity to motivate many people from the countryside towards the urban regions. A city is well managed, allowing economies of scale and network effects whilst lowering climate impacts on transportation.
However, urbanisation also has negative effects. Urban development creates heightened vulnerability to homelessness, increased waste, water pollution, air pollution, deforestation, flooding, health-related hazards affecting people of all generations and ages groups.
Homelessness: Through the process of gentrification, urbanisation leading to rising property values and rental rates push low-income households into precarious living arrangements including slums, squatter settlements, poor housing and homelessness. Even people with jobs sometimes cannot afford adequate housing on minimum wages.
Waste: The current practices of the uncontrolled dumping of waste on the outskirts of towns and cities have created a serious environmental and public health problem. Urban populations consume much more food, energy, and durable goods than rural populations resulting in health hazards and urban environmental degradation.
Water pollution: degrades water quality through three primary mechanisms 1) the discharge of pollutants at point sources and mobilisation of pollutants from diffuse sources, 2) flow alteration and 3) changes to the temperature of receiving watercourses.
Air pollution: Concentrated energy use leads to greater air pollution with a significant impact on human health. Automobile exhaust produces elevated lead levels in urban air. Large volumes of uncollected waste create multiple health hazards. Urban development can magnify the risk of environmental hazards such as flash flooding.
Deforestation: When people from rural villages move to cities, they tend to use more resources since their incomes and rates of consumption are generally higher. As populations migrate to cities, new residential buildings need to be erected. Cities are often built and expanded into forest areas resulting in deforestation.
Flooding: Urbanisation reduces the ability of lands to absorb rainfall through the introduction of hard, impermeable surfaces.
Health hazards: Urbanization creates major health problems including pollution-related health conditions, deterioration in hygiene, communicable and transmittable diseases, poor sanitation and housing conditions, and health conditions including malnutrition and obesity from sedentary.
The problem with urbanisation is urban risks
Urbanisation increases the exposure of people and economic assets to hazards and creates new patterns of risk, making the management of disasters in urban centres particularly complex.
Urban disasters carry their unique characteristics. They are directly linked to different social, political, economic, and environmental elements combined together. That’s why a disaster in one place will likely have a different outcome from a similar catastrophe elsewhere. Think in those cases about vulnerability and exposure to location-related hazards; and increased vulnerability due to poor local governance, environmental degradation, and the shortage and the overstretched of resources.
Urban disasters are nothing new. What is new is their growing scale.
What we have certainly seen:
- an inappropriate increase in urban planning permissions being granted and poor land usage in general.
- the failure to regulate building standards resulting in specific groups of the population suffering the most.
- poor health, inadequate nutrition, poverty, illiteracy, and deficient sanitation constitute a permanent threat to the physical and psychological security of urban populations and create “everyday risks” which cause small-scale disasters on an ongoing basis.
- that risk accumulation is also today amplified by human activities.
Transitioning businesses realize that they must put more attention on urban risks and the drivers of risk: Urbanisation. Only then can cities and economies become more resilient.
Modern urbanisation: moving from rural settings to urban areas
Since the dawn of the industrial revolution, we’ve been talking about the concept of urbanisation. individuals head to where economies are thriving to build better lifestyles for themselves and their families. The latter however has enabled many of us to overlook how different modern urbanization is in terms of the sheer scale and demographics (geographical locations and ageing populations).
The reason for urbanisation hasn’t fundamentally changed: people still move to cities because they hope to find better opportunities.
However, environmental and climate change reasons are increasingly pushing populations into cities. For example, in Western Asia, droughts led to crop failures and water shortages, leading to migration to cities.
In their report Understanding the nature and scale of urban risk in low- and middle-income countries and its implications for humanitarian preparedness, planning, and response, the International Institute for Environment and Development states:
“Most of the world’s urban population and its largest cities lie outside the most prosperous nations, and almost all future growth in the world’s urban population is projected to be in low- and middle-income countries. It is common for up to 50% of the population to live in informal settlements within these urban centres. These are often located on land that is exposed to hazards, with poor-quality provision for water, sanitation, drainage, infrastructure, healthcare, and emergency services.”
To paint this picture further, in Asia, an additional 120,000 people join urban areas every day. That requires more than 20,000 new dwellings, 250 kilometres of new roads, and the infrastructure to supply over six million litres of drinkable water.
Add to this that by 2070, those over 60 will make up 42% of our total global population.
It’s an inherently dangerous situation. We only need to look at the air pollution problems in cities like Jakarta or Delhi, the wildfires in California, or the difficulty managing a pandemic in crowded areas, to see that urbanisation has its own inherent risk. These areas aren’t usually disaster-prone by nature. Instead, it is urbanisation that brings the risks to fruition.
So what’s going on, and what do we need to do about it? We will come onto this, but first, we need to understand why urbanisation is increasing to the degree of knowing how to address the risks it brings.[carbon risk, weather/ climate change risk, urban risk, …]
What causes urban risks?
Throughout human history, people have been attracted to cities as centres of culture, learning, and economic opportunity. But urbanization also has costs, especially when it happens rapidly.
By nature, extensive urbanization is not inherently disaster-prone. Still, people, poverty and man-made disasters are concentrated in cities as the absolute volume of people living in urban areas increases.
The growing rate of urbanization and the increase in population density can lead to the creation of risk, especially when urbanization is fast, poorly planned and occurring in a context of widespread poverty. UNDRR
What makes urban areas ripe for the development of disaster are socio-economic frameworks is the heightened need to assess, mitigate and monitor the exposure and vulnerability to disaster risks. A lack of appropriate infrastructure can result in worse outcomes when hazards are encountered. As noted previously, this driver of urban risk is caused by poor local governance, environmental degradation, and limited resources.
How can we reduce urban risks and build more resilient smart cities?
Whether one thinks about Italy, France, Germany, Spain, or the UK, all European markets are aiming to shape more resilient and sustainable paths to the future.
For insurance, Europe relies heavily on accessing raw materials from other markets to convert these raw materials into products and services. This means that Europe will show heightened interest in responsible business models to balance access to raw material and the production and manufacturing of sustainable products and services.
So European market players will look for initiatives that can help countries and companies to:
- move to a more circular economy business model
- drive economies of scale through increased volume produced with sustainable materials
- enhance the proximity of risk-reducing infrastructure and services (e.g., sanitation, drainage, waste collection, health care, emergency services, etc.)
Why are smart cities paving the way to urban risk mitigation solutions?
The picture thus far is rather doom and gloom. However, our cities have also been morphing differently alongside increasing urbanization, opening up possibilities for more significant risk mitigation. Increasingly, our cities are becoming smart cities, with interconnected local infrastructure, logistics, utilities, and more.
Through the power of data, the smart city model can both predict and influence behaviour which, in turn, can be used to mitigate urban risk with the right approach. Imagine how remarkable it could be if the data available within a smart city were used to better plan and use land. Combined with the Internet of Things sensors and artificial intelligence algorithms this is possible.
With the concept of Environmental, Social, and Corporate Governance (ESG), which is becoming a priority for cities worldwide, cities can be transformed in ways to enable urbanization activities that are safer, possible, and more reliable and therefore reducing urban risk. In essence, urbanization can become more sustainable, which is, after all, precisely the focus of ESG in the first place.
Interestingly, it is startups, innovations and disruptors that are driving changes and building smarter cities. It’s them that are coming up with solutions to the problems of urbanization, ranging from traffic management through to sensors managed cities and water supply management.
CleanTech as an emerging sector is expanding at speed with 1,000 ventures having raised billions of dollars.
Our team at Alchemy Crew estimates that UrbanTech startups include approximately 2,000 different ventures. Seven hundred of these have received an estimated $10+ billion investment.
Some examples of high growth markets include:
There has been $5 billion of investment in companies providing utility solutions. These include ventures such as Landis and Gyr in energy management through smart meters as a service, flood mapping, risk analytics and pricing exposure management solutions covering the entire planet Fathom Global, and provider of on-Demand access to public transportation to optimise greener, affordable and happier movement within cities Swat mobility.
For instance, smart waste management solution provider, Rubicon offers smart trash cans and a digital platform that enable local governments and businesses to gain visibility on types of waste. As cities continuously expand, waste becomes an increasing design flaw. This poses health risks within cities, governments, municipalities, enterprises, independent businesses, hauler operations and when using the platform users can improve current processes, deliver waste management efficiencies, help customers recycle better to meet their sustainability goals. Clients and partners include organisations such as Helvetia Environment, Odakyu Group.
There has been a $2 billion investment in companies providing mobility solutions. Interesting new entrants include parking and mobility management platform, Arrive, electric vehicles charging networks, Ionity, and AI-based natural disaster management and natural phenomenon science solution, One Concern. You will also find that InsurTech startups Ticker also leverage IOT technology with smart city planning to provide a new generation of applications that utilize data analytics linked directly to embedded vehicle data to improve the delivery of sustainable mobility insurance solutions.
Consider deep learning-powered geospatial intelligent data platform Orbital Insight. The company analyzes satellite-based earth imagery data and supply chain traceability data to generate meaningful location insight and translate them into global economic trends. It helps businesses, governments and municipalities to understand the impact of weather on specific locations by automating decision-making and leveraging geospatial intelligence. As a deep learning-powered geospatial Earth analytics solution, the platform enables businesses to select what they want to measure from their proprietary set of industry-leading algorithms.
From the image, they can:
- identify in real-time the type of object (vehicle, aircraft, ships, etc.)
- understand the land use: Roads, building a forest, etc.
- measure trends: foot, ship, car traffic.
The platform, to date, has processed petabytes of imagery, billions of IoT pings and detected more than 8.7 billion objects with their computer vision algorithms. This approach helps insurers, municipalities, businesses to quickly gather insight and make informed decisions. Clients and partners include Airbus, Deutsche Bank, Location IQ, Microsoft, Sumitomo Mitsui Bank, Royal Bank of Canada, Unilever to name but a few.
With an investment of $1 billion, companies are making waves in smart governance. Market players include mobile crowd-sourced incident reporting VectorLiveSafe and AI-based collection, analysis, usage, evaluation and measurement of actionable citizens insight through AI automation and visualization Zencity.
AI-enabled weather forecasting platform, Tomorrow enables the identification of the impact of weather-related losses on businesses via predictive insights dashboards, weather visualization mapping, and actionable alerts. The company helps businesses, governments, and municipalities to understand the impact of weather by automating decision-making. Tomorrow helps teams prepare for the business impact of weather by automating decision-making and enabling climate adaptation at scale through weather intelligence software. Clients and partners include AirMexico, Amazon, Google Cloud, Facebook, Ford, Intact, Porsche, Tata, Uber. The solution optimizes city planning and resource management to keep residents safe and reduce weather-related risks, reducing transit times and minimizing safety risks.
Urban risk: Insurers actions
Of course, where there is a risk, we need to work harder and faster to mitigate that risk, and the insurance industry has a vital role to play here. And many insurers are rising to the challenge.
In partnership with the CityMakers program, AXA focused on a smart city mobility planning initiative for the City of Paris. AXA has invested in startups, such as one that offers favourable finance and insurance options for new vehicles that owners are willing to put on a car-sharing platform. Startups include a peer-to-peer car-sharing marketplace for renting cars OuiCar, real-time location-specific smart city platform GEO4CAST and intracity carpooling services to work, Karos.
SwissRe Institute’s Quantum Cities is an excellent example of how insurers can partner with others to effect positive change in the arena of urban risk. The initiative explores the risks of interconnected systems and guides both businesses and governments as they look to solve the critical challenges of our modern cities. The institute produces insights to guide companies and governments to develop effective resilience solutions to make cities more liveable. This effort is part of the Swiss Re Institute exploratory research portfolio. In this context, Swiss Re Institute is facilitating Public-Private Research Partnerships (e.g., PPRPs) to solve key challenges and risks society faces, including:
- Mobility and transportation: From e-scooters, eVTOL (vertical take-off and landing) aircraft, and autonomous mobility networks to end-to-end global supply chains
- Healthy living: Behavioural science and life & health platforms for longer, better lives
- Climate change and sustainability: post-disaster urban-resilience platforms for governments and industry to better respond to disasters (e.g., using satellites and drones to better manage first responder resources.)
- Humans and machines: Enhancing humans with supporting technology with machine-intelligence-enabled, digital identity and trust.
Storebrand launched a new Solutions Fund. Storebrand Smart Cities! The fund invests in companies with products and services that contribute to three central themes that lay the foundation of success for smart cities: Urban planning, mobility, and water management. Areas of focus include waste, renewable energy, public transportation, climate-smart water, Electric vehicles, Green building among others.
Mitigating urban risks when economic development drives rural-urban migration
Transitioning to a better urban world rightly forces our attention and efforts towards different and consistent sustainable approaches to mitigate existing and future urban problems. Urban risk is a reality of the modern world. Our goal is to support insurers and growth ventures to identify, validate and commercialise innovations to solve the issues of urbanization so that disasters are avoided and our cities become genuinely more liveable.