In recent years, a growing number of forced migrants from Africa and the Middle East have travelled to Europe across the Mediterranean Sea. While the number of new arrivals to Europe has diminished since 2016, migration flows to Italy have increased, and the Italian reception system has struggled to process the growing number of applications for residence. A significant proportion of the forced migrants who arrive in Italy end up living in informal settlements, such as occupied buildings, shacks, containers and tented camps. In this study, we assess the vulnerability of asylum seekers and refugees living in informal settlements in Italy, based on data from the first nationally representative survey of this population. We find high levels of vulnerability in small settlements in the south of Italy. In general, men are more vulnerable with respect to subjective health, whereas women are more vulnerable with respect to employment and objective health. However, we also find that these findings depend upon the ways in which vulnerability is conceptualised and measured. We develop a new approach for measuring the vulnerability of refugees and asylum seekers in high income countries, based on latent trait analysis, which accounts for measurement error and the correlation between indicators. This analysis confirms that Asians who recently arrived – both in Italy or in the settlements - have significantly higher vulnerability than Africans who have recently arrived. Our findings have implications for the design of social protection and inclusion policies, as well as future research that measures vulnerability.