Insuring Climate Change: New Risks and the Financialization of Nature

Insurance is a central institution in modern societies. Economic and technological developments generate ‘new risks’, which are often covered by new forms of insurance. Because of its underlying uncertainty — the difficulty both of predicting its effects and evaluating its costs — climate change represents a major challenge for the insurance industry. It also represents a challenge for states, who have historically played the role of insurers ‘of last resort’ in the event of catastrophes. This article examines the ongoing financialization of climate risk insurance, which is part of a larger trend of financialization of nature. Financialization, through measures such as ‘catastrophe bonds’, is the neoliberal solution to the rising costs of natural disasters which the insurance industry has experienced since the 1990s. The article analyses the effects of financialization on the insurance industry, on the state's role as insurer ‘of last resort’, and on associated forms of knowledge production (big data), critiquing the process of financialization on both economic and political grounds.