A single geopolitical conflict could lead to $14.5 trillion of losses over a five-year period, insurance marketplace Lloyd’s of London has calculated.
In an exercise seemingly to highlight the value of insurance, Lloyd's worked with the Cambridge Centre for Risk Studies to examine the theoretical impact on gross domestic product resulting from severe damage to infrastructure and global trade networks due to the enforcement of sanctions and major disruption to shipping lanes.
Under the theoretical conflict calculations, $14.5 trillion was the average weighted global economic loss over a five-year period based on three potential conflicts of different severities, with $7.8 trillion in the lowest severity scenario up to $50 trillion in the most extreme.
"With more than 80% of the world’s imports and exports – around 11 billion tons of goods – at sea at any given time, the closure of major trade routes due to a geopolitical conflict is one of the greatest threats to the resources needed for a resilient economy," Lloyd's said.
In the theoretical conflict, Europe's heavy reliance upon other industrially advanced states for supplies like semiconductors for car and electronics manufacturing could see it lose up to $3.4 trillion.