Lloyd’s, the world’s leading insurance and reinsurance marketplace, has released a new report estimating that a hypothetical geopolitical conflict could lead to a staggering $14.5 trillion USD in economic losses over five years. The scenario, part of Lloyd’s systemic risk series, examines the potential global fallout from disruptions to trade patterns and supply chains, offering insights to risk managers, governments, and insurers on the risks posed by such a crisis.

The report highlights the severe vulnerability of global trade, with over 80% of imports and exports—approximately 11 billion tons of goods—at sea at any time. The closure of critical trade routes due to geopolitical tensions would have catastrophic effects on global supply chains and resource availability.

Economic losses would primarily result from damaged infrastructure in conflict zones and the enforced realignment of global trade due to sanctions and compromised shipping lines. Regions heavily reliant on international trade would be particularly affected. For instance, Europe, which depends on industrial goods like semiconductors, could face up to $3.4 trillion in losses.

Rebekah Clement, Lloyd’s Corporate Affairs Director said: “Lloyd’s is supportive of public-private efforts to avoid global crises such as shortages of vital commodities and is committed to helping businesses remain resilient and prepare for the risks from widespread disruptions and financial loss from countless global risks, including geopolitical stability.

“The value of insurance also extends to the compounding secondary impacts of geopolitical conflict, including downstream delays and interruptions by impacted trading partners and suppliers. Examples of insurance covers which can help businesses protect themselves against these impacts include political risk insurance and contingent business interruption, as well as dedicated war risk insurance.

Source: Lloyds