A sharemarket crash poses the biggest risk to Auckland and New Zealand, with the potential to cost the city US$3.56 billion ($5.60 billion) and the country US$4.16 billion.

These are the findings of the first Lloyd's City Risk Index out today, examining the possible financial fallout from an oil price shock, floods, volcanoes, pandemics, storms and other disasters.

Scott Galloway, Lloyd's New Zealand general representative, explained the market crash scenario.

"That is predominantly the effects on the share market from extreme movements in share prices and we're talking about the value of the interruption to economic activity as a result of a market crash over five years," Galloway said.


The index estimated $11.84 billion of New Zealand GDP was at risk from many man-made and natural threats during the next decade.

It examined the effects on 301 major cities and Galloway said New Zealand disasters were akin to others internationally, except for volcanoes.

The research was carried out by the Cambridge Centre for Risk Studies. "We're trying to stimulate discussions between insurers, government and businesses on how to improve resilience," Galloway said.

KPMG's Simon Hunter said the index emphasised the importance of cities and Auckland as a key driver of New Zealand's prosperity.

"However, it's important to look at what could drive the market crash scenario. In New Zealand, our sharemarket doesn't capture a large portion of the agribusiness sector that drives the economic fundamentals of the country. Auckland as our mega-city is also more a reflection of the role it plays servicing the wider NZ economy, rather than hosting lots of stand-alone economic activity within its own boundaries," Hunter said.

For the third year running, KPMG's 2015 Agribusiness Agenda had highlighted world-class biosecurity as the top priority for the country to avoid such a catastrophic impact.

"Recent events in Russia," Hunter said, "have also underlined how distant geopolitical instability can have a major impact on market access and price for our key food exports."