The (re)insurance implications of famine and political risk

TransRe’s Jake Borsellino on why (re)insurers should prepare for near term political unrest…

Corn and wheat prices

“Give them bread and circuses and they will never revolt”

- Juvenal

From the French Revolution (‘then let them eat cake’) to the worldwide unrest in 2008, the Arab Spring in 2011 and the protests in Sri Lanka this year, food shortages and price rises always have political consequences.


Drought in grain-producing territories coupled with rising oil prices caused the price spikes of 2008 and 2011. This year the Russia-Ukraine conflict has added a new geopolitical challenge to the world’s food network.


In 2021, Ukraine and Russia represented 29 percent of the global trade in wheat, 18 percent of corn and 78 percent of sunflower oil. With inflation already an issue in the global economy, the effective closure of the Black Sea export route drove prices of the affected commodities significantly higher.


As long as the conflict endures, we may assume that exports of these commodities will remain sporadic and unpredictable, that prices will reflect this uncertainty and (free passage agreements notwithstanding) that Ukraine’s harvest and exports will be lower this year.

Two additional complexities

1. Oil

The price of oil affects the cost of nearly every good or service produced in a modern economy. As with food, exporting nations benefit from price rises, but most consumers in developing economies suffer. The periods of unrest in 2008 and 2011 coincided with both food and oil price spikes.


2. Climate change

Despite major advances in modern farming practices, much of the world’s food is still grown on relatively small parcels of land by smallholder farmers who rely solely on rainfall for their crops and livestock. Drought is their biggest fear, and drought frequency has more than doubled over the last 25 years.

For many poorer countries, agriculture still represents a high proportion of GDP. Drought threatens livelihoods as well as food security, and can trigger large-scale human displacement, which in turn may trigger further strife where the displaced settle. The World Bank estimates 65 percent of the world’s poor will live in conflict-affected countries by 2030 which may displace more than 70 million people.

(Re)insurers should prepare for potential civic fallout

To assess the risk of civil unrest in a particular territory, we analyse the general dependence on the global food supply chain (imports), the specific dependence on Ukraine and Russia and the current base level of social, political and economic dissatisfaction:

1. General dependence on the global food supply

Based on the percentage of domestic consumption imported in 2021, we categorise each territory at low, medium or high risk of experiencing food shortages.

2. Specific dependence on Ukraine and Russia

While all importers face higher prices, those who source from Ukraine face an amplified impact as they develop new trading relationships, possibly with sellers that are further away and at greater cost.

The above criteria focus on the likelihood of a food shortage. The next question is whether such shortages will lead to strikes, riots and/or civil commotion.

3. Social, political and economic dissatisfaction

Rich countries may import significant amounts of food, but they have the economic strength to provide stimulus support during crises. Citizens of poorer countries that experience high inflation or slow economic growth may receive less support and be less able to adapt to higher food prices, making protest more likely.

Because political/social tensions are abstract concepts and difficult to quantify, we use certain techniques to approximate them. Although there is no uniform way to accurately measure a society’s satisfaction with its government, we assume civil unrest is more likely in corrupt countries, so we look at the Corruption Perceptions Index. We also include the Social Safety and Security Index, which forms part of the Global Peace Index that considers the amount of violent crime, the number of refugees/displaced people and the number of riots/violent protests each year, to indicate each country’s level of social violence.

We take three economic indicators (GDP per capita, consumer price inflation, GDP growth), one political indicator (the Corruption Perceptions Index) and one social indicator (the Social Safety and Security Index) and blend the weightings based on a statistical model of the historical record of unrest. This analysis provides a level of risk factor for civil strife in a given territory. This factor and similar analyses could help inform underwriting of potential political risk exposures in certain territories and lines of business.


Today’s world food system has become highly inter-connected globally and linked with energy and other commodity markets. This has introduced an unprecedented level of complexity into the world’s food system. As a result, consumers worldwide experience significant benefits, as well as systemic risks. The Russia-Ukraine conflict has provided an invaluable case study into how disruptions at one node in the global food network inevitably ripple across the world. The intrinsic link between food prices and civil unrest presents an important risk for policymakers and the insurance industry to help manage.

Jake Borsellino is Data Analyst – Natural Catastrophe Research at TransRe