Food system shock: The insurance impacts of acute disruption to global food supply
This report is intended to help underwriters operating in the Lloyd’s market identify previously unconsidered food security impacts on insurance and risk.
Closing the gap between food production and supply is an essential component of improving food security. However, the ability of the world food system to achieve this is under chronic pressure from global population growth and shifting consumption patterns. While many food security discussions have focused exclusively on this pressure, little work has been done to explore the global food system’s growing vulnerability to acute disruption.
Lloyd’s commissioned the development of a scenario of an acute but plausible disruption to global food production and its consequences to explore the implications for insurance and risk. The scenario – developed by experts in food security and sustainable development economics – was peer-reviewed by a diverse group of leading academics, before being presented to insurance industry practitioners for assessment at two workshops.
The scenario described in this report is not a prediction; it is an exploration of what might happen based on past events and scientific, social and economic theory.
- A systemic shock to global food crop production could have widespread economic, political and social impacts, including food price rises, food riots and changes in stock market values.
- Food system shock could trigger significant claims across multiple classes of insurance, which could be compounded by the potential for food system shock and its consequences to span multiple years. The insurance industry could also be affected by impacts on investment income, and the global regulatory and business environment.
- The insurance industry is in a position to make an important contribution to improving the resilience and sustainability of the global food system by encouraging businesses to think about their exposure to risks throughout the food supply chain and prioritise the development of innovative risk transfer products.
- Insurers need to work with researchers to develop models capable of capturing not only the physical effects of extreme events but also their various economic and social impacts.