Monday, June 22, 2015

A Major Insurer Explores the Risks of Using Insurance to Reduce Climate Shocks on Global Food Supplies

The Lloyd's building in Lime Street is the current home of Lloyd's of London. (Credit: "Lloyd's of London - Licensed under CC BY 2.5 via Wikimedia Commons) Click to Enlarge.
A stress test prepared by Lloyd's of London concluded that a chain reaction of floods, drought and related diseases could cripple the world's food supply, leading to a crisis that could spark further unrest, including the possibility of rioting in major cities, a terrorist attack in the United States and even a Russian invasion.

Lloyd's, a major global insurer, outlined the scenario in a report last week.  It is seen as an unlikely but possible scenario that could cut across the insurance industry's separate lines of underwriting, as economies are devastated by rising temperatures and hungry populations.

In the scenario, people in poorer nations suffer the most from failing small farms, rising risk of famine and damaging natural disasters that wreck already wobbly farming systems. In the United States and other wealthy nations, food shortages cause the price of groceries and gasoline to soar while stock prices tumble. Severe floods create further havoc along major rivers in the Midwest that ship food overseas.

"The food system's existing vulnerability to systemic shocks is being exacerbated by factors such as climate change, water stress, ongoing globalisation, and heightening political instability," the report says.

The fragility of the current food system is already apparent. About 805 million people worldwide are undernourished, according to the United Nations, and scientists believe climate change will have a negative effect overall on crop yields and fisheries in the future, even if increased carbon dioxide levels encourage some additional production.

That's possible because the population is rising from 7.3 billion now to a projected 9.6 billion by 2050, mostly in Africa and other developing regions. The United Nations says food production will have to grow by 70 percent to feed that number of people. Some experts warn that climbing temperatures are already shrinking crop yields.

Read more at A Major Insurer Explores the Risks of Using Insurance to Reduce Climate Shocks on Global Food Supplies

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