Lloyd’s research and insights platform, Futureset, has published its fourth systemic risk scenario, modelling the hypothetical but plausible impacts of an explosive volcanic eruption on global GDP.
If the scenario happened the global economic impact could reach $1.6 trillion over a five-year period.
While major volcanic events are relatively rare, the risks they pose are very real. ‘Any lack of attentiveness from the global communities to geological warning signs could leave populations and economies unprepared for the immediate and persistent fallout caused by eruptions,’ says Lloyd’s.
The business impacts of a major volcanic eruption
Analysis shows that while the immediate impacts of a volcanic eruption, including business interruption, environmental damage, property loss and loss of life carry significant implications for a community, they are isolated geographically. The indirect effects from an eruption may have greater global implications. From supply chain disruption to a decline in workforce availability, to longer-term impacts in the most severe cases such as damaged productivity and consumer confidence, instabilities in global food availability and increased geopolitical tensions.
The research also highlights the key role insurance can play, including supporting widespread collaboration on pre-emptive, cross-sectoral measures that can mitigate and build preparedness in the face of volcanic risk.
