A new report from Chatham House, a policy institute for international affairs based in the UK, paints a very dire picture for the future of the global insurance industry. The past two years have been incredibly difficult in terms of insurance. Two record-breaking years for natural disasters have left the industry rattled and somewhat disoriented. The impact of these disasters has taken a toll on the global economy as well, damaging what was already a fragile structure. According to the report, the global economy can only withstand one week of severe disruption to production and transportation before collapsing.
The report notes that a disruption of only two days can have a major impact on the price of food and water as supplies begin to dwindle. A nation’s energy and communications infrastructure can also be severely crippled in the event of a major catastrophe as workers would not be able to travel and maintain vital electrical systems. Prolonged disruption would force many businesses to shut down as investors beginning pulling out money in an attempt to cut their losses.
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While the threat potential for such a major catastrophe is slim, the report notes that many of the world’s governments are under-prepared for such events. Insurers and risk modeling firms assert that the threat of a worldwide disaster capable of doing such damage is not likely to happen within this century, but governments should take the matter seriously. Being prepared for such a disaster could mean the difference between sustainability and complete chaos.