Increased terrorism, the collapse of numerous African nations, hundreds of thousands of deaths and trillions in financial losses – those are just some of the consequences explored by a new report investigating the impact of food production shocks.
Lloyd’s recently released a paper investigating the insurance impacts of a major disruption to the global food supply, finding that a combination of greater demand and climate change causing increased unpredictability mean the globe is highly vulnerable to drops in food production.
“Sudden disruptions to the food supply chain could reduce global food supply and trigger a spike in food prices, leading to substantial knock-on effects for businesses and societies,” the report states.
“Crop production shocks could pose a systemic threat to food security if they were to impact any of the world’s major ‘breadbaskets’, regions which produce a surplus of staple food crops considered vital for global society as a whole.”
Although the exact nature of climate change’s impact on individual growing regions is uncertain, the consensus is that it be widely negative.
“Increases in the intensity and frequency of extreme weather events such as floods, droughts and wildfires, coupled with a rise in conditions amenable to the spread and persistence of agricultural pests and diseases, are expected to have a destabilising effect on world food production,” the report states.
“This is further exacerbated by the growing issue of water scarcity, which is accelerating at such a pace that two-thirds of the world’s population could live under water stress conditions by 2025.”
In the report, Lloyd’s maps out a hypothetical scenario, exploring a set of possible consequences of a strong El Niño weather system, prompting substantial flooding in the US and Pakistan, and severe drought in India and Australia, along with pushing the spread of plant diseases through South America.
Under this scenario, wheat, corn and soybean prices could quadruple, setting off food riots in Middle East, North Africa and Latin America, along with wiping billions from various stock markets.
The report’s authors envisage the collapses of governments in Yemen, Egypt and Tunisia, along with civil war in Nigeria and increased Russian military presence in Ukraine.
“There is little doubt that a systemic production shock to the world’s most important food crops as described in this scenario would generate a cascade of economic, political and social impacts,” the report warns.
“What is striking about the scenario is that the probability of occurrence is estimated as significantly higher than the benchmark return period of 1:200 years applied for assessing insurers’ ability to pay claims against extreme events.”
To read the full report and detailed investigations of specific insurance impacts, click here.