Securitizing catastrophic environments, insuring uninsurable lives
In 2006 the government of Ethiopia together with the World Food Programme and the World Bank ran a pilot to provide insurance cover for farmers at risk of severe drought. That same year, the government of Mexico subscribed to the first sovereign parametric insurance scheme designed to generate insurance cover for populations affected by earthquake risk.1 The two cases offer an illustration of how sovereign states have resorted to global insurance schemes as a means to enable their role as sovereign security providers. Because of the difficulty in calculating probabilities of occurrence and the magnitude of environmental hazards, environmental risks had escaped the logic of insurance at a global level and had traditionally been rendered as ‘catastrophic’.2 However, creative financial and insurantial schemes developed since the early 1990s have led to innovative moves that enable the functioning of insurantial technologies in relation to these risks. Strategies deployed for this purpose have articulated two manoeuvres: first, the conception of ‘parametric insurance’, a shift from the traditional indemnity insurance that required that an agent verified a loss once it had occurred; and, second, a financial manoeuvre involving the securitization of catastrophic risks in the global markets by means of financial derivatives.