Lloyd’s of London has estimated that global economic losses could reach £4 trillion under a “plausible increase” in extreme weather events linked to climate change that cause crop failures and food and water shortages.
The research, conducted in collaboration with the Cambridge Centre for Risk Studies, said social and economic changes are affecting the impact of heatwaves, freeze, droughts and water loss, and windstorms.
It was stressed that its “systemic risk scenario”, which models the global economic impact of extreme weather, was hypothetical.
But said the work would improve businesses’, insurers‘ and policymakers’ understanding of their exposure to critical threats such as extreme weather.
“The global economy is becoming more complex and increasingly subject to systemic threats”, said Dr Trevor Maynard, executive director of systemic risks at the Cambridge Centre for Risk Studies.
He also added that the research would “help businesses and policymakers explore the potential impacts of these scenarios”.
Lloyd’s modelled global economic losses of extreme weather events by estimating the impact of food and water shocks on global gross domestic product over a five-year period.
The global economic loss ranges from £2.4 trillion in the lowest severity scenario up to £14 trillion in the most extreme scenario.
“We will continue to use our convening power to support global risk resilience, providing risk transfer solutions to support companies and countries in their transition goals”, said John Neal, CEO of Lloyd’s.