A significant proportion of the 1 billion people who live near active volcanoes are uninsured for eruptions, according to Swiss Re.

The reinsurer says it has developed the world’s first global volcano model, assessing risks posed by more than 500 volcanoes and enabling insurers to quantify expected losses.

The model shows one in seven of the world’s largest urban areas are within 150km of an active volcano, and an eruption could cost a large city up to $US30 billion ($39.4 billion).

Among the top 10 at-risk cities are Tokyo, Naples, Manila, Jakarta and the Nicaraguan city of Managua.

“In some countries the volcanic threat constitutes a substantial part of the insurable risks, and the ability to assess and price such risks with precision is crucial,” the reinsurer says.

CEO Reinsurance Asia Jayne Plunkett says as urbanisation gathers pace, the protection gap for volcanic hazard is widening.

“But economic disruption and large-scale economic losses for people and businesses locally are only one part of the picture,” she said.

A large-scale eruption would affect supply chains, causing economic and insured losses.

Only Iceland has compulsory volcano insurance.

Head of Catastrophic Perils Martin Bertogg says the model will allow insurers to calculate premiums for volcanic risk to individuals, businesses and countries.

“It’s now up to us in the insurance industry to use this new opportunity, together with all partners, to design trustworthy and affordable coverage to help make the world more resilient when disaster strikes,” he said.