Amid growing fears over another looming avian flu epidemic the Lloyd’s market warned that a future human pandemic would have a crippling impact on a global economy still feeling the effects of COVID.

The market has published its latest systemic risk scenario highlighting that the global economy could be exposed to potential losses of $13.6 trillion over a five-year period from the threat of a hypothetical future human pandemics.

The global economic losses across the three severity levels modelled under the scenario range from $7.3 trillion in the least severe scenario to $41.7 trillion in the most extreme, equivalent to a reduction in global GDP of between 1.1% and 6.4%.

It is the sixth scenario produced by Lloyd’s Futureset and the Cambridge Centre for Risk Studies, which aims to equip risk managers, insurers and policymakers with data-based insights to aid effective preparation against the most significant risks facing society today.

Lloyd’s said from an economic perspective, the widespread impacts would be primarily driven by disruption across global industries due to local lockdowns and global travel restrictions. With the transportation sector worth over 10% of global GDP, sustained international travel restrictions could potentially result in significant economic costs.

“The insurance industry has developed a range of specialist solutions to help manage the risks associated with pandemics, including affirmative cover for new outbreaks of known and unnamed infectious diseases, insurance for the development, transit and storage of vaccines, and protection against interruption or cancellation of events during a pandemic,” the report stated.

Rebekah Clement, Lloyd’s corporate affairs director, said: “Our research shows that insurance is more than a financial safeguard; it is a critical enabler of societal resilience and recovery, and the insurance industry is well-equipped to help businesses and governments prepare for future pandemics with different complexities and variables.

“As well as paying claims, insurers can support with advice on proactive measures to lessen the impact of potential crisis and can mobilise resources and expertise to support rapid emergency response and containment efforts.”

The scenario explores hypothetical but plausible systemic risk scenarios and contains an interactive data tool that allows users to reveal the potential economic and insurance impact of each scenario across 107 countries and at three levels of severity (major, severe and extreme).

Using global Gross Domestic Product (GDP) as its central measurement, Lloyd’s and Cambridge model calculates the global economic loss of a human pandemic scenario as:

$13.6 trillion is the global economic loss over a five-year period (the probability weighted average across the three severities we have modelled)

Lloyd’s explained the scenario severities have been given a probability of occurring in the next five years, based on several risk factors.