Lloyd’s has released its latest systemic risk scenario, projecting potential global economic losses of US$13.6 trillion over five years from a hypothetical human pandemic.
The scenario, produced in collaboration with the Cambridge Centre for Risk Studies, examines three levels of severity, with estimated losses ranging from US$7.3 trillion to US$41.7 trillion. These figures correspond to reductions in global GDP of between 1.1% and 6.4%.
This study is the sixth in a series developed by Lloyd’s Futureset and the Cambridge Centre, providing data-driven insights to assist risk managers, insurers, and policymakers in preparing for significant societal risks.
The analysis highlights how widespread economic disruptions would primarily stem from local lockdowns and international travel restrictions. With the transportation sector accounting for over 10% of global GDP, sustained limitations on international travel could result in significant economic consequences.
The insurance industry has created various specialised products to address pandemic risks, including coverage for outbreaks of infectious diseases, insurance for vaccine development and distribution, and protection against event interruptions or cancellations.
Rebekah Clement (pictured above), corporate affairs director at Lloyd’s, emphasised the role of insurance in fostering societal resilience.
“Our research shows that insurance is more than a financial safeguard; it is a critical enabler of societal resilience and recovery. The insurance industry is well-equipped to help businesses and governments prepare for future pandemics with different complexities and variables,” she said.
Clement noted that insurers can offer proactive advice to reduce the impacts of potential crises and mobilise resources to support emergency response and containment efforts.
Using global GDP as a central metric, Lloyd’s and Cambridge calculated the economic impact of a potential pandemic as follows:
The model integrates historical pandemic data, insights from COVID-19, and academic expertise to estimate GDP impacts across 107 countries at three severity levels: major, severe, and extreme.
The analysis also evaluates how regions might respond to immediate and long-term pandemic effects, such as supply chain disruptions, reduced consumer demand, and increased government expenditures for healthcare and emergency response.
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