The global economy could be exposed to potential losses of $13.6 trillion over a five-year period from the threat of a hypothetical future human pandemic, according to systemic risk scenario research from Lloyd’s.
Produced in partnership with the Cambridge Centre for Risk Studies, this research is designed to provide risk managers, insurers, and policymakers with data-driven insights to enhance preparedness for major risks. The global economic losses across the three severity levels modelled under Lloyd’s hypothetical human pandemic scenario range from $7.3 trillion in the least severe scenario to $41.7 trillion in the most extreme, equivalent to a reduction in global GDP of between 1.1% and 6.4%.
As per Lloyd’s, the scenario was designed and calculated by analysing historical pandemics and their socio-economic impacts, with the assessment of the impact on GDP based on a combination of scenario modelling, historical studies, data from COVID-19, and academic expertise.
From an economic perspective, Lloyd’s explained that the widespread impacts would be primarily driven by disruption across global industries due to local lockdowns and global travel restrictions.
“With the transportation sector worth over 10% of global GDP, sustained international travel restrictions could potentially result in significant economic costs,” the firm’s research said.
Lloyd’s continued, “The insurance industry has developed a range of specialist solutions to help manage the risks associated with pandemics, including affirmative cover for new outbreaks of known and unnamed infectious diseases, insurance for the development, transit and storage of vaccines, and protection against interruption or cancellation of events during a pandemic.”
Rebekah Clement, Lloyd’s Corporate Affairs Director, commented, “Our research shows that insurance is more than a financial safeguard; it is a critical enabler of societal resilience and recovery, and the insurance industry is well-equipped to help businesses and governments prepare for future pandemics with different complexities and variables.
“As well as paying claims, insurers can support with advice on proactive measures to lessen the impact of potential crisis and can mobilise resources and expertise to support rapid emergency response and containment efforts.”
This is the sixth scenario developed by Lloyd’s and the Cambridge Centre for Risk Studies, following a hypothetical geopolitical conflict marked to disrupt global trade and supply chains, potentially resulting in $14.5 trillion in losses for the global economy over a five-year period.
