Lloyds Of London Projecting $5 Trillion In 5-Year Losses From Climate Disasters
Insurance Giant Lloyd’s of London is maybe the only reinsurance company that most people have probably heard of. These are the Insurance Companies that insure Insurance companies. So, yeah, more money than God. Lloyd’s has warned in the past about impending risks to insurers from rising climate damages. They have developed a new scenario looking at possible consequences “hypothetical” extreme impact climate events, with some sobering numbers.
Lloyd’s of London:
Lloyd’s, the world’s leading marketplace for insurance and reinsurance, today launched a systemic risk scenario that models the global economic impact of extreme weather events leading to food and water shocks, estimating the loss to be $5trn over a five year period. The scenario explores how a hypothetical but plausible increase in extreme weather events, linked to climate change, could lead to breadbasket crop* failures and significant global food and water shortages. As the event plays out, societies around the world could see widespread disruption, damage and economic loss, promoting major shifts in geopolitical alignments and consumer behaviours.
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1. Systemic Risk: Lloyd’s define systemic risk as a low likelihood, high impact risk which affects either a systemically important global enterprise or multiple sectors, societies, or national economies. They can be global in impact, often hitting billions of people simultaneously. Among the other systemic risk scenarios modelled in the research are geopolitical conflict, human pandemic and economic stagnation. You can find out more about the threat from extreme weather and food shocks here.
2. Using global Gross Domestic Product (GDP) as its central measurement, Lloyd’s model calculates the global economic loss of a series of extreme weather events leading to food and water shocks as:
$5trn is the global economic loss over a five-year period (the weighted average across the three severities we have modelled)
The global economic loss ranges from $3trn in the lowest severity scenario up to $17.6trn in the most extreme scenario
$711bn is the expected global economic loss (the sum-product of the five-year economic loss and the probability of the event occurring)
3. The scenario severities have been given a probability of occurring in the next five years, based on several risk factors. In the extreme weather events leading to food and water shocks scenario, the probabilities for each severity are: Major 2.29% (1 in 50-year), Severe 1.10% (1 in 100-year), Extreme 0.30% (1 in 300-year).
EDIT
https://climatecrocks.com/2023/10/16/insurance-giant-warns-of-extreme-climate-risk/
