بلایای طبیعی به عنوان پایان صنعت بیمه؟ استراتژی های رقابتی اسکالر ، نقل و انتقالات ریسک جایگزین، و بحران اقتصادی

The aftermath of Hurricane Katrina has piqued interest in the insurance industry, and this scrutiny has led to assumptions that the industry has become unstable and unprofitable with the increased incidence of disasters in highly-insured regions of the world. This paper challenges that assumption by arguing that the insurance industry has responded by spreading risk through scaled and networked recovery schemes. We found that because of competitive strategies of risk-spreading and displacement arrangements, the industry has actually profited as a whole. Regional insurance companies have always relied on the higher financial scales of the reinsurance industry in Munich, Zurich, and London. But with claims reaching into the billions of dollars, the reinsurance industry itself has raised premiums, spread risk farther afield, and jumped scale by spreading risk to futures markets called Alternative Risk Transfers (ARTs). However, the recession beginning in 2008 has called into question the viability of using futures markets as insurance. It is shown through a media analysis of four major business publications (The Economist, The New York Times, The Financial Times and The Wall Street Journal) how the industry responded to the costs of the 2004, 2005, and 2006 hurricane seasons. Because geography is rather new to this literature, this paper also offers a broad review of the insurance industry.

Hurricanes Katrina and Andrew, the Indian Ocean tsunami, Ike, and Gustav, among other extreme weather-related events, have captured the world’s attention. The sheer force of these hazards and the threats to lives and possessions becomes a frightening possibility for many in coastal communities. Following Hurricane Katrina, it became clear that (the United) States were not well-equipped to respond to the security demands of these communities after major natural disasters. This is clearly due in part because of the varying scales of natural hazards matched up with the rigid geographical solutions that are stuck at the scale of federal politics (Bakker, 2005, Braun, 2005 and Waugh, 2006).1 Less clear are the strategies and scales employed by private industry (Auerswald et al., 2006), in this case, the role insurance companies have played in bridging the scales of disaster recovery (or response) and how they have geographically restructured their financial strategies after a string of high-cost years. Following Hurricane Andrew in 1992, which cost insurers over 6 billion dollars in claims, Leggett (1993, p. 30) suggested that “a complete collapse of the reinsurance industry” was very possible as a result (see also, Cummins et al., 2002). Similarly Mills (2005, p. 1043) predicts a forked path for the future of the industry considering the increased intensity of natural disasters: “[they] may rise to the occasion and become more proactive players in improving the science and crafting responses. Or, they may retreat from oncoming risks, thereby shifting a greater burden to governments and individuals”. In this paper we seek to give an early answer to Mills’ predicament by illustrating how the competitive strategies of the insurance industry have changed since 2004. To do this we assess, through a discourse analysis of over 60 pieces from four major business publications (The Economist, The New York Times, The Financial Times and The Wall Street Journal), how the industry responded to the record high costs of the 2004 and 2005 Atlantic hurricane seasons compared to the record low costs of 2006. This media analysis reveals that it altered its competitive strategy through geographic withdrawal, increase in premia, and the entrance of new providers. What becomes clear in section three and four is that the competitive strategy of other (re)insurers was to reorganize and securitize their investments by opting to spread risk across varying geographic scales. Insurance has the ability to link the local with the global through a network of risk-sharing arrangements and therefore has the capacity to overcome the state-related problems of scale that are associated with natural hazards.2 It is concluded that the industry potentially possesses a built-in resilience through its risk-spreading arrangements (in part Alternative Risk Transfers or ARTs) and a large capital base (often provided through the reinsurance industry) that allows it to effectively approach and respond to catastrophic loss events like Hurricane Katrina. We conclude that the socio-political repercussions of this restructuring disproportionately affect poorer demographics. Despite some clear geographical questions relating to the entwining of social, scalar, and environmental matters, the relation between disasters and insurance has received little sustained attention from social and economic geographers (some exceptions include, Doornkamp, 1995, Palm, 1995, Bennett, 1999, Bennett, 2000, Mcleman and Smit, 2006 and Priest et al., 2005), while economists and policy analysts have conducted more sustained disaster-insurance studies (Bougen, 2003 and Kunreuther and Pauly, 2006). Even scholars of security and international relations have been keen to offer their perspectives (Paterson, 2001, Ericson et al., 2003, Jagers et al., 2004 and Lövbrand and Stripple, 2006). There has been some work by geographers in relation to “the New International Financial System,” but it only references insurance as a major player in the control of financial capital (Leyshon and Thrift, 1997, pp. 115–160). While some questions have been asked in relation to how global climate change will affect the study of (environmental) economic geography (e.g., Yohe and Schlesinger, 2002 and Bridge, 2008), and others ask how human and physical geographers can work together on the issue (Pollard et al., 2008), geographers have not asked, to our knowledge: “how have insurance companies dealt geographically with global environmental change and the resulting natural disasters?3 ” Answering such a question can open doors for further, more critical, research on how the insurance industry has altered its competitive strategy and wrestled power away from states. It is also for this reason that this paper on “geographies of insurance” also offers a broad review of the insurance industry.4 Our focus is primarily an empirical examination of the insurance industry’s competitive strategies of scale, from pulling out of regions to employment of the derivatives industry. Concerning the latter, this paper remains largely empirical because theorizing is only conjecture at this point with relation to ARTs, particularly in the present economic climate. As Bougen (2003, p. 255) writes, “even for active participants in the field, the immaturity of the market for securitized catastrophic risk suggests that its viability remains massively underdetermined and as such an empirical issue”.

To repose Mills’ two options for the insurers at this stage of global climate change, that “[insurers] may rise to the occasion and become more proactive players in improving the science and crafting responses. Or, they may retreat from oncoming risks, thereby shifting a greater burden to governments and individuals” (Mills, 2005, p. 1043), we find that the insurance industry has taken both avenues, with some primary insurers deciding to pull out of risky markets, asking for federal intervention, leaving people without insurance, or arguing that the nature of their claims did not describe their policy. As we have illustrated, others, specifically in the reinsurance sector, were successful at mitigating losses by spreading risk spatially across the globe with ARTs and raising primary and re- insurance premia. The fact that hurricanes repeatedly struck one area in the world did not seem to hurt the industry to a great extent can be explained by the competitive strategies at several geographical scales of policyholders, reinsurers, investment portfolios and, more recently, ARTs. Insurance is a highly-adaptable collective security regime that is able to use its amorphous structure to provide financial security from a whole litany of risks. It is an institution that is neither here nor there; there is no locus from which the industry roots itself. With sales offices in thousands of communities and policies extending from bilateral contracts to multi-billion dollar reinsurance policies, the industry connects individuals to a global network of finance and risk-sharing pools. The insurance industry is an institution that is both local and global at the same time. When considering the problematic geography of natural hazards, it seems that insurers are well-suited to deal with these transnational events. While geographies of insurance certainly offers potentially helpful concepts for hazards and disasters security research and economic geography generally, the insurance industries’ successes come at a socio-political cost to those affected by disasters and discrepancy between their security expectations and reality. First of all, although insurance serves to link the world through risk-sharing arrangements, the primary goal of insurance companies is to generate profits for shareholders. But along these lines we also point out the shortcomings of the industry, as they are corporations that operate in the pursuit of profit concerned with self-preservation and dividend growth at the forefront of restructuring, not social altruism. Although the industry may have encouraged climate change awareness in places of high risk, Jagers et al. (2004) argue that that we should not confuse this as a counterhegmonic challenge to the oil industry’s critical views of climate change. Therefore despite the interest in funding climate change modeling projects and spurring awareness programs, we should not lose sight of the fact that insurance is still one of the most powerful promoters of neoliberal policies of privatization and is absent when it comes to challenging government policy on climate change issues (Harmes, 1998). The profitability imperative, which is our second criticism, forces companies to alienate potential customers through high premiums and/or conditional coverage (see Harmes, 1998). Even in areas of very high risk, competition for profits makes it difficult for a company to simply withdraw coverage. As one commercial underwriter for a multinational insurance company states, “it’s pretty much that competitive right now where somebody will always take everything out there. If it’s that bad a risk, there’s probably some decent [premium] money in it” (Ericson et al., 2003, p. 294). The higher cost of premiums, however, excludes those lower-income communities often most affected by large-scale disasters. From this perspective, the restructuring will inevitably leave millions of individuals without or with geographically inadequate property insurance either forcing them to move from (or in Block’s (2006) cold reason, to take “responsibility”), or endure the pain of destroyed, property, memories, culture, and community. Third, because insurance provides economic security by translating all losses into dollar terms, it is not very good at providing non-economic forms of security. One of insurance’s defining features is its actuarial science, which claims the ability to assess risks with reasonable accuracy in order to commodify and distribute them. Assigning values to certain goods works well as long as they have prices attached to them: cars, household items, buildings and so forth are relatively straightforward. However, insurance cannot cover the loss of non-economic ‘goods’ such as community sentiments and culture. Insurance gives a false sense of security when people assume that disastrous places can be liveable when all possessions can be translated into capital; it reduces all things, sentimental or otherwise, to a mere commodity. When these commodities become too expensive to insure or insurance is unavailable, then perhaps it will force a re-evaluation of how one lives. Given the economic dimension of insurance and the fact that it can be costly, insurance does not protect a significant proportion of the population (Dymski, 2005). Furthermore, by commodifying environmental disasters through the capital market, disasters become manageable through recovery schemes that draw on their own new fears and insecurities (Pollard et al., 2008). Spreading risk at a global scale through futures markets is our fourth social criticism. ARTs are examples of diversified risk investments that de Goede (2004: 198) writes are infinitely imaginable and potentially “infinitely profitable”. De Goede (2004) argues that speculating on such uncertain futures through the increased commercialization of weather derivatives has the potential to make them culturally normative, in effect creating and essentializing dangers where they did not exist before. Indeed, ARTs appear to be the result of the inability of the reinsurance industry to know by actuarial calculation what their exposure to risk is. In some ways, ARTs are the insurance industry’s attempt to capture the ambiguities of risk, geography, and time in an extra-territorial scale. ARTs can be conceived as the best defence against actuarial uncertainty related to disasters. Although they are imagined numbers linked to imagined disaster geographies, disasters are not imaginary ( Thrift, 2000). Katrina made this pointedly clear: the threats are real, geographically and temporally uncertain, and expensive. Increased global warming disaster potentials mean higher-priced disaster recovery that conventional insurance cannot afford. 2008 was the fourth highest year in payouts in a decade with $25 billion, according to ISO’s Property Claim Services Unit ( Hartwig, 2009) and ARTs, along with the state as the last backstop, may be the best defence in the near future. That said, by participating in the securities markets, the insurance industry has also been exposed to the recent drying up of credit and uncertain investors calling into question ARTs as an alternative. We conclude that the industry has taken many paths to restructuring. Further studies detailing and theorizing government-run hazards institutions and the evermore public and dynamic strategies of the insurance industry would provide an opening into policy research by painting a more complete picture of how these bodies operate in practice. This would include focussing the present analysis on specific localities and diversity among insurance providers since it is clear that, “the insurance ‘industry’ is non-monolithic, with considerable regional variations in coverages, hazard exposure, and regulation within and among countries” (Mills, 2005, p. 1040).