The FINANCIAL — The vulnerability of the overstretched global food system to sudden shocks, and the wide repercussions for communities, businesses and governments was highlighted on June 16 by a report published by Lloyd’s, the specialist insurance and reinsurance market.
The scenario, produced in conjunction with UK and US academics, shows the far-reaching economic and humanitarian consequences that disruptions such as weather catastrophes or plant pandemics – many of which are exacerbated by climate change – could have on the global economy.
The study shows that the impact of El Nino, the spread of a windblown wheat rust in Russia and warmer temperatures in South America could lead to wheat, maize, soybean and rice prices quadrupling. It also suggests that European stock markets could lose 10% of their value and the US stock market fall by 5%. In addition, this series of events has the potential to trigger food riots in urban areas across the Middle East, North Africa and Latin America, leading to wider political instability.
Tom Bolt, Director of Performance Management at Lloyd’s, said:
“Traditionally insurers look only at the financial and physical impact of catastrophes. But in today’s interconnected world, these events can have complex and far-reaching economic and humanitarian implications.
“The insurance industry has a key role to play in improving the resilience of communities, businesses and governments. Our role is not only to ensure that our ability to pay claims helps them to recover quickly from these events, but to ensure they have a greater awareness of the complex risks they face in a globalised world.
“One billion people go hungry every year, and this figure could treble by 2050. We need to close the gap between production and supply to improve food security, protect supply chains, and feed the world’s population. The global food system is under chronic pressure to meet an ever-rising demand, and acute disruptions could lead to a wide range of problems which businesses and societies need to protect against. The effects of these kinds of environmental catastrophes could generate major economic and political impacts, and create a wide range of insurance claims.”