Accepted Paper:

Turning uncertain disasters into risks and assets : the case of catastrophe-bonds.  

Author:

Sara Angeli Aguiton (CNRS)

Paper short abstract:

Working at the intersection of sociology of risk and social studies of finance, this communication propose to investigate catastrophe-bonds and to document the process by which uncertain disasters are turned into both calculable risks and profitable assets.

Paper long abstract:

Since the mid 1990's, a specific variety of assets called "Insurance-Linked Securities" (ILS) has been developed on the financial markets. ILS are the vehicles by which insurance companies transfer their risks to investors. Today, approximately half of the ILS market is composed of catastrophe-bonds (cat-bonds), which are securities attached to natural disasters. The specificity of cat-bonds is that their construction do not only rely on financial knowledge or accounting technologies, but also on meteorology, geosciences, building engineering, etc. Turning natural disasters into assets indeed requires actors to be involved in two lines of entangled operations : the shaping of the risk (framing, definition, measurement, establishment of thresholds...) is inseparable from its financial valuation.

Working at the intersection of sociology of risk and social studies of finance, in an empirical fashion, this communication propose to investigate the process by which uncertain disasters are turned into both calculable risks and profitable assets. To do so, I will reflect on the part played by the disaster modeling industry who offers expertise to insurers and investors alike. Disaster models are crucial for cat-bonds construction : they state expected loss, they establish the borders of what is an acceptable risk for investors, they enable the calculation of yields and are even used by investors to rate cat-bonds. Consequently, I will argue that the financialisation of environmental problems both relies on and legitimates new style of financial expertise, which are used to transform disastrous uncertainties into tools of financial security for insurers and of profits for investors.

Panel T005
Turning Things into Assets