Catastrophe bonds and financial risk: Securing capital and rule through contingency

Abstract

This paper uses the example of catastrophe bonds to investigate how exposures to geophysical, biological, and meteorological catastrophic events are constituted as securitizable and exchangeable financial risks in the insurance-linked securities (ILS) market. It discusses the techniques of catastrophe modeling as a pivotal mobile methodology for the calculation and creation of contingent assets out of the fabric of insured environmental and financial vulnerabilities. Catastrophe models are shown to enable economic exchange of contingent futures belonging to ontologically and geographically disparate orders. Pension funds are then introduced to illustrate how biological lives and retirement savings have become deeply entangled in the creation and extension of the ILS market. Pension funds are both major institutional investors in catastrophe bonds and also the principal sellers of “longevity risk” posed by pensioners. The extent to which labor both profits from and embodies securitized insurance risks illustrates the growing importance and ambivalence of contingency as a modality of accumulation and rule.