Global: Geopolitical conflict could expose global economy to $14.5tn loss
Source: Middle East Insurance Review | Nov 2024
Lloyd’s last month published a scenario that reveals the global economy could be exposed to losses of $14.5tn over a five-year period from the threat of a hypothetical geopolitical conflict causing widespread disruption to global trade patterns and supply chains.
Geopolitical conflict is the fifth scenario in Lloyd’s systemic risk series which aims to equip risk managers, governments and insurers with data-driven impact assessments of the most significant global threats facing society today.
With more than 80% of the world’s imports and exports – around 11bn tons of goods – at sea at any given time, the closure of major trade routes due to a geopolitical conflict is one of the greatest threats to the resources needed for a resilient economy.
The economic impacts of this scenario stem primarily from severe damage to infrastructure in the conflict region and the need for realignment of global trade networks due to the enforcement of sanctions and the effects of compromised shipping lines.
The impact on businesses depends on the region they are in and factors such as involvement in the conflict, reliance on international trade and the goods that would be delayed or lost due to the supply chain disruptions. Europe for example, which is heavily reliant upon other industrially advanced states for supplies like semiconductors for car and electronics manufacturing, could stand to lose up to $3.4tn. M