Vulnerabilities to agricultural production shocks: An extreme, plausible scenario for assessment of risk for the insurance sector

Climate risks pose a threat to the function of the global food system and therefore also a hazard to the global financial sector, the stability of governments, and the food security and health of the world’s population. This paper presents a method to assess plausible impacts of an agricultural prod...

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Bibliographic Details
Published in:	Climate risk management Vol. 13; no. C; pp. 1 - 9
Main Authors:	Lunt, Tobias, Jones, Aled W., Mulhern, William S., Lezaks, David P.M., Jahn, Molly M.
Format:	Journal Article
Language:	English
Published:	Elsevier B.V 2016 Elsevier
Subjects:	Agriculture Breadbasket failure Climate extremes Insurance Scenario Climate extremes Breadbasket failure Agriculture Insurance Scenario
Online Access:	Get full text
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Summary:	Climate risks pose a threat to the function of the global food system and therefore also a hazard to the global financial sector, the stability of governments, and the food security and health of the world’s population. This paper presents a method to assess plausible impacts of an agricultural production shock and potential materiality for global insurers. A hypothetical, near-term, plausible, extreme scenario was developed based upon modules of historical agricultural production shocks, linked under a warm phase El Niño-Southern Oscillation (ENSO) meteorological framework. The scenario included teleconnected floods and droughts in disparate agricultural production regions around the world, as well as plausible, extreme biotic shocks. In this scenario, global crop yield declines of 10% for maize, 11% for soy, 7% for wheat and 7% for rice result in quadrupled commodity prices and commodity stock fluctuations, civil unrest, significant negative humanitarian consequences and major financial losses worldwide. This work illustrates a need for the scientific community to partner across sectors and industries towards better-integrated global data, modeling and analytical capacities, to better respond to and prepare for concurrent agricultural failure. Governments, humanitarian organizations and the private sector collectively may recognize significant benefits from more systematic assessment of exposure to agricultural climate risk.
ISSN:	2212-0963 2212-0963
DOI:	10.1016/j.crm.2016.05.001