Conclusion 223
can adapt to the changeable flow and interaction of risk and responsibility
between individuals and groups may affect how well it can adapt to changing needs in a heating climate.
Insurance goes hand-in-hand with re-insurance, meaning that geographically specific risk pools are globalised. Zac Taylor (Chapter 11) describes,
for example, how a large proportion of insurance income from high-risk
residences in Florida is spread across catastrophe reinsurers in countries
as far afield as Bermuda, the United Kingdom, and Germany. Taylor shows
how reinsurance and insurance-linked securities displace and transmogrify climatic risks into global investment capital. But as Taylor explains,
these flows are confined to regions that meet the tightly defined needs of the
insurance market ‘with risks that are sufficiently profitable to lure capital,
actuarially well-defined enough to be priced with confidence, and where
other conditions (like favourable state regulation) enable and ensure market
access’ (Chapter 11, p. 144).
Lack of flow (of capital) leads to accumulation in some places and deprivation in others – in essence inequality. This is the product of insurance
markets such as those described by Lucas and Young (Chapter 6, p. 79)
in Houston Texas, where ‘insurance-driven recovery processes left renters doubly disadvantaged, often paying for rent on an uninhabitable home
while searching for new or temporary residence.’ Insurance increased the
resilience of affluent property owners, at the expense of those with less
assets. But as Rebecca Elliott (Chapter 5) notes, insurance is in essence
risk sharing, in that it creates forms of ‘collective mutuality’ in which
insurance customers pool their risk and contribute funds in order to protect one another if disaster strikes. Mutualised risk premiums, which are
cross-subsidised so that people living in higher risk areas do not bear all of
the cost for their risk, are seen as fair in solidarity systems, such as France,
Spain, or Denmark, or as in the case of Takaful Islamic insurance (Swartz
& Coetzer 2010). But in neoliberal countries with mostly privatised insurance systems, mutualisation is seen as negatively affecting climate adaptation. This is because they see granular, individualised risk-reflective pricing
as sending a ‘price signal’ to incentivise individuals to make transformative change to reduce the underlying risk. For Elliott (Chapter 5, p. 61), the
insurance industry’s commitment to risk-reflective pricing is ‘a core contradiction’ in that addressing climatic disasters ‘will require flows of resources
and responsibility no matter what. Eliminating cross-subsidisation does not
eliminate social interdependence.’
Insurance is seen as a principal mechanism for adaptation to a heating
climate by neo-liberal governments around the world (Lucas & Booth 2020).
Novel techniques for insuring catastrophic events, together with the perceived ability of re-insurers to spread risk globally are key to this belief. Big
data and insurtech innovations are also promoted as transformative of the
industry, enabling insurers to provide tailored policies that are also able to
promote and reward adaptive behaviour. However, examples of insurance
can adapt to the changeable flow and interaction of risk and responsibility
between individuals and groups may affect how well it can adapt to changing needs in a heating climate.
Insurance goes hand-in-hand with re-insurance, meaning that geographically specific risk pools are globalised. Zac Taylor (Chapter 11) describes,
for example, how a large proportion of insurance income from high-risk
residences in Florida is spread across catastrophe reinsurers in countries
as far afield as Bermuda, the United Kingdom, and Germany. Taylor shows
how reinsurance and insurance-linked securities displace and transmogrify climatic risks into global investment capital. But as Taylor explains,
these flows are confined to regions that meet the tightly defined needs of the
insurance market ‘with risks that are sufficiently profitable to lure capital,
actuarially well-defined enough to be priced with confidence, and where
other conditions (like favourable state regulation) enable and ensure market
access’ (Chapter 11, p. 144).
Lack of flow (of capital) leads to accumulation in some places and deprivation in others – in essence inequality. This is the product of insurance
markets such as those described by Lucas and Young (Chapter 6, p. 79)
in Houston Texas, where ‘insurance-driven recovery processes left renters doubly disadvantaged, often paying for rent on an uninhabitable home
while searching for new or temporary residence.’ Insurance increased the
resilience of affluent property owners, at the expense of those with less
assets. But as Rebecca Elliott (Chapter 5) notes, insurance is in essence
risk sharing, in that it creates forms of ‘collective mutuality’ in which
insurance customers pool their risk and contribute funds in order to protect one another if disaster strikes. Mutualised risk premiums, which are
cross-subsidised so that people living in higher risk areas do not bear all of
the cost for their risk, are seen as fair in solidarity systems, such as France,
Spain, or Denmark, or as in the case of Takaful Islamic insurance (Swartz
& Coetzer 2010). But in neoliberal countries with mostly privatised insurance systems, mutualisation is seen as negatively affecting climate adaptation. This is because they see granular, individualised risk-reflective pricing
as sending a ‘price signal’ to incentivise individuals to make transformative change to reduce the underlying risk. For Elliott (Chapter 5, p. 61), the
insurance industry’s commitment to risk-reflective pricing is ‘a core contradiction’ in that addressing climatic disasters ‘will require flows of resources
and responsibility no matter what. Eliminating cross-subsidisation does not
eliminate social interdependence.’
Insurance is seen as a principal mechanism for adaptation to a heating
climate by neo-liberal governments around the world (Lucas & Booth 2020).
Novel techniques for insuring catastrophic events, together with the perceived ability of re-insurers to spread risk globally are key to this belief. Big
data and insurtech innovations are also promoted as transformative of the
industry, enabling insurers to provide tailored policies that are also able to
promote and reward adaptive behaviour. However, examples of insurance