Suspension of major trade routes due to conflicts pose greatest threats to resources needed for resilient economy, says UK-based insurance and reinsurance marketplace
The global economy could lose $14.5 trillion over the next five years due to the threat of a hypothetical geopolitical conflict causing widespread disruption to international trade patterns and supply chains, according to Lloyd's, a UK-based insurance and reinsurance marketplace, which warned on Wednesday.
"Geopolitical Conflict is the fifth scenario in Lloyd's systemic risk series which aims to equip risk managers, governments, and insurers with data-driven impact assessments of the most significant global threats facing society today," it noted.
With over 80% of the world's imports and exports – or approximately 11 billion tons of goods – at sea at any given time, the suspension of major trade routes due to conflicts is one of the most serious threats to the resources needed for a resilient economy, the press release said.
Recently, the Red Sea route lost significant vessel traffic as a result of ongoing Israeli attacks on Palestine and Lebanon.
"The economic impacts of this scenario stem primarily from severe damage to infrastructure in the conflict region and the need for realignment of global trade networks due to the enforcement of sanctions and the effects of compromised shipping lines," it noted.
