Will GREECE go hungry if it exits the euro? That's a question for the insurance industry

26 June 2015 —
The globalisation of food trade over the past few decades has made the world food system better equipped to respond to small localised losses in food production and feed a growing global population. It has arguably also increased our exposure to systemic risks.

A major crop failure in top exporting countries like the US, Ukraine, Australia or Brazil will now be felt in every country in the world. This could cause civil unrest in some countries or significantly affect our economic and financial systems.

Between mid-2007 and 2008, crop failures caused by drought, low global stocks and the widespread use of export bans led to the price of major crops (wheat, maize, soybeans and rice) more than doubling.

For many developed countries, the increase in the grain price in 2007 and 2008 was easily absorbed and had marginal impact on food availability. For developing countries, more exposed to international trade, domestic prices increased dramatically. In some this triggered violent protests.

On 16 June, Lloyd's of London published its Food System Shock report looking at whether a loss of food production in major breadbaskets could indirectly significantly affect the global insurance sector. It combines into one year a set of production shocks similar to those seen in the past for particular grains and considers the current and future possible geo-political landscape to outline some "what if" scenarios. The events are not predictions, but paint a picture of what a global shock to food production might look like.

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