Lloyd's supports businesses to identify and mitigate complex geopolitical risks
Lloyd’s, the world’s leading marketplace for commercial, corporate and speciality risk solutions, today released a new report that identifies emerging geopolitical risks and provides businesses with practical advice on how to mitigate them.
Shifting powers: meeting the challenges of the geopolitical landscape, produced in partnership with the University of Cambridge’s Centre for Risk Studies, explores the transformation of the geopolitical risk landscape over the last decade and focuses on the ten most pressing risks these themes present today, which range from cyber-attacks, social unrest and the migration crisis.
The research found that geopolitical power centres have shifted since the financial crisis, driven by five macro-trends, including rising populism and the decline of the US’ role as a conflict mediator. The research also provides a strategic perspective on these systemic risks, whilst analysing their probability and impact.
Lloyd’s aims to use this research to support businesses with the resources and knowledge required to help protect their organisations, proposing a series of steps for businesses to consider, such as assessing supply chain exposure and taking precautions to safeguard IP and trade secrets against major cyber-attacks.
The report details the existing insurance solutions available to help businesses stay resilient during periods of crises and uncertainty, and identifies opportunities where the insurance industry can help develop new solutions to address these risks. It highlights the innovative work already underway from Lloyd’s Lab start-ups, such as Moonshot and Verisk Maplecroft, who harness artificial intelligence and new sources of data to better understand geopolitical threats. The research also highlights the critical role that insurance can play in helping developing economies mitigate geopolitical risk, in environments where insurance penetration is low, but the political risk landscape is volatile.
Through the Lloyd’s Lab, Futureset, and the Product Innovation Facility, Lloyd’s will continue to bring the industry together to help communities and businesses build resilience against geopolitical risk.
Bruce Carnegie Brown, Chairman of Lloyd’s, said: “The geopolitical landscape is more complex, intricate and interconnected than ever before. Lloyd’s has a unique role as a hub of risk expertise and innovation, and we are delighted to have partnered with the University of Cambridge’s Centre for Risk Studies to identify ways we can help businesses manage these geopolitical challenges. Lloyd’s, and the wider insurance industry, can play a central role in addressing geopolitical risk, and in doing so create a safer, more sustainable world.”
Andrew Coburn, Chief Scientist at the University of Cambridge’s Centre for Risk Studies, added: “The changing nature of geopolitics poses a significant challenge to an industry traditionally associated with protecting physical assets. Insurers must innovate to safeguard the dependencies and complex operational practices which underpin global commerce from a host of geopolitical risks as they intersect with technology, public opinion, climate change, and other factors. We are delighted to contribute to this thought leadership promoting ambitious and necessary changes within the industry which will help to safeguard us all.”
Lloyd’s emerging risk report, “Shifting powers: meeting the challenges of the geopolitical landscape”, can be accessed here.
2. The Lloyd’s Innovation team produced its first report on Geopolitics following a request from the Product Innovation Facility (PIF) to focus on this subject. The Product Innovation Facility is Lloyd’s commitment to nurturing a “safe space” for underwriters to experiment with new ideas in a controlled way, which balances the need for appropriate oversight with the risk of not innovating fast enough. The PIF explore non-standard risks that might not fit the traditional market such as risks relating to intangible assets, new technologies and others.
3. Lloyd’s partnered with the University of Cambridge’s Centre for Risk Studies (CRS) to produce the report. The subject, “Shifting Powers” was chosen in January 2020, and the project started in January 2021.
4. The report examines ten geopolitical scenarios, along with their degrees of severity and probability. It suggests actions that businesses could take to address these geopolitical risks, highlights the insurance products that are currently available and points to potential areas for product innovation that would help mitigate these geopolitical risks.
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