China could face $4.6t in economic losses if extreme weather conditions persist in five years

Asia Pacific follows closely at $4.5t.

In the likelihood an extreme event was to affect China, it could result in economic losses of $4.6t over five years, according to Lloyd’s of London’s data tool.

The hypothetical event would make it the most severely impacted region. Asia Pacific follows closely at $4.5t. In terms of percentage of gross domestic product, the Caribbean would suffer the greatest impact if an event occurred in that region, with a 19% loss over a five-year period.

Lloyd's systemic risk scenario assessing the potential global economic impact of extreme weather events resulting in food and water shortages. This scenario anticipates losses totalling $5 trillion over five years.

The scenario examines the consequences of an increase in extreme weather events related to climate change, leading to crop failures in key food-producing regions and substantial global shortages of food and water. 

As these events unfold, societies worldwide could experience extensive disruptions, damage, and economic setbacks, prompting significant changes in geopolitical alliances and consumer behaviours.

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This study, the first of nine systemic risk scenarios, is a collaboration between Lloyd's Futureset and the Cambridge Centre for Risk Studies. Its purpose is to assist those exposed to critical threats like extreme weather to understand their risks and the role of risk mitigation and insurance in enhancing their resilience.

To support this research, a state-of-the-art data tool has been developed. It provides businesses, governments, and insurers with a data-driven assessment of the financial impact of significant global threats, including extreme events, across 107 countries and at three levels of severity: major, severe, and extreme.

This tool also offers regional analyses, demonstrating potential economic losses in specific areas. Recovery times for individual countries or regions depend on factors like their economic structure, exposure levels, and resilience.

The research underscores a substantial gap in climate risk protection, with estimates indicating that only one-third of global economic losses caused by extreme weather and climate-related risks are currently insured.