Lloyd's of London Warns of Potential Geopolitical Conflict Costing Global Economy up to $14.5 Trillion
Lloyd's of London, the British insurance market, has warned in a report that a potential geopolitical conflict could cost the global economy up to $14.5 trillion over the next five years.
The new scenario from Lloyd's is part of its research on systemic risks, which it provides to insurance seekers worldwide. This scenario focuses on the severe economic consequences that could result from the disruption of global trade flows by a major geopolitical conflict.
Currently, over 80% of global goods traverse the oceans, making the closure of key commercial routes a means to paralyze global trade. The primary potential conflict zone is the Red Sea and the Gulf, two sensitive areas for fuel and various products from Asia to Europe.
The resulting damages would be twofold: the destruction of infrastructure in conflict zones and the realignment of global commercial networks, which would be forced to change routes due to sanctions and compromised maritime lines. The extent of the impact would vary depending on a country's involvement in the conflict and its dependence on international trade.
Insurance coverage is expected to experience a new surge, including policies against political risk, potential business interruption, and even war risk insurance. The global economy is indeed facing a significant risk.
