A limited relation: it is the conventional risks (or standard operation) known, statistically predictable, which constitute the principal field of activity of insurance. On the other hand, the new types of risks (also called “hypothetical risks”), which insurance companies have difficulty in grasping or anticipating, reach the limits of “insurability” because of the difficulty of assessing their possible consequences7 . In these cases, insurance companies are forced to question the main validation which leads to the identification of risks through probability calculations. In recent decades, large-scale risks have been emerging and calling into question the well-established system of traditional insurance, as we will see below.
2. The change in insurance
8 “Insurance”, in Encyclopaedia Universalis (CD-Rom, version 8, 2002). The first known insurance (...)
9 Mutuality Code, Official Journal (French Republic), March 12, 2002. There are approximately 5 (...)
10 We must not confuse “mutual insurance companies”, which are anonymous companies (...)
11 Cf. Bernard Eme and Jean-Louis Laville, “The Solidarity Economy”, Le Monde, November 18, 1992. The economy (...)
6The first insurances were “mutual societies”, which still survive today8. In France, for example, according to the Mutual Insurance Code, which has just been modernized, mutual insurance companies are defined as “non-profit groups of private law persons” 9 which, by means of contributions from their members, propose to carry out an action of foresight, solidarity or mutual aid aimed in particular at risk prevention and joint management of their consequences. Their aim is to contribute to “cultural, moral and physical development and to the improvement of the living conditions of their members” 10. These mutuals offer their members a wide range of services (including health, fire, accident, civil liability, agricultural disaster insurance, legal protection, personal assistance or surety insurance). They are not looking for profit making; their surpluses are distributed in full, after constitution of legal reserves. Mutual insurances emphasize solidarity and practice socialized risk management. By doing so, they are part of the social economy sector, which is the opposite of the market economy11.
7Another type of insurance appeared in the Middle Ages, linked to the development of maritime trade. It is based on a contract called a “maritime bill of exchange” or “big adventure loan”. This is a loan pledged on goods transported by sea. If the goods were lost on the way, the lender forfeited any right to reimbursement of the amount loaned. Otherwise, he received his capital in return, increased by appreciable interest.
The story of Zaccaria, Genoese trader
To illustrate this scenario, one often evokes “the history of Zaccaria”, Genoese trader who scented and realized a juicy business, in 1298. He learned that the artisans of Bruges were asking for a product used in the textile industry. , which was available in Venice. However, to carry out this transaction, he had to borrow the necessary sum to buy the goods and transport them to Bruges by sea. This case involved many uncertainties, in particular the risk of fortune at sea, the risk of price and the risk of loss of the cargo. Cunning as he was, he approached two wealthy people who agreed to lend him the necessary sum and provide risk coverage, at a high interest rate. In this operation, Zaccaria succeeds in doing a double blow: obtain a loan and simultaneously transfer his risks to his creditors. Thanks to this skilful arrangement, Zaccaria was able to sell a commodity that did not belong to him (during the transaction, it was the property of his backers) and derive profits from the operation. In this form of pre-capitalist insurance, the seeds of the capitalist stage were already present because insurance and financial investment were closely linked.
Source: Giraud Pierre-Noël, “The story of Zaccaria, Genoese trader”, Le commerce de promises, Paris, Seuil, 2001, pp. 35-73.
12 Bruno Latour, “Beck or how to remake his intellectual tools”, Preface, in Beck Ulrich, La S (...)
13 Jean Baechler, Le capitalisme, t. II, The Capitalist Economy, coll. Folio-history, Paris, Gallimar (...)
8The modern insurance system was put in place during the industrial revolution and the rapid development of modern insurance is directly linked to the rise of capitalism. It was from this time that “societies became manufactures of risk” 12, the number and severity of which intensified. At the same time, insurance takes on a primordial role in the preservation of individual and collective assets13, private and public, which the advent of risk threatens, while allowing economic activities to be maintained despite the adversity of the disaster. We can observe that, applying traditional methods, insurers implement standardized, econometric, fragmented and probabilistic instruments that the occurrence and scale of catastrophic risks fundamentally call into question. With the evolution of the nature of the risks to be covered, insurers have been led to develop ever more sophisticated and complex methods to apprehend the financial consequences of damage. For this purpose, they drew heavily on modeling or scenario theories.
9Currently, two basic indicators constitute the main decision-making tools for drawing up insurance contracts corresponding to the different types of damage: the reasonably expected loss (SRE), which can occur under normal business conditions. in the absence of exceptional or accidental events, the maximum possible loss (SMP) occurs in the most unfavorable circumstances (worst case) which are exceptionally met. The SREs and SMPs make it possible to measure the potential for risk realization. In the case of earthquakes, for example, quantifying "earthquake exposure" begins with establishing an earthquake inventory of a given region, including the frequency of occurrence of the disasters. , their intensity (based on historical observations which are translated on a twelve degree scale) and magnitude (recorded by the seismograph and plotted to the Richter scale). On the basis of these data, it becomes possible to quantify the exposure to the hazard by determining the periods of recurrence of earthquakes and to calculate the probability of damage. Insurance conditions will be defined based on these calculations. They will relate to the insured risks, the limits of the guarantee, the limits per event.
3. The risk economy
14 The level of direct insurance premiums is estimated to reach 2,500 billion euros
10Risk economics encompasses all transactions between insurers and policyholders whose aim is to cover damage resulting from risks, against the payment of a premium14. The source of insurance profitability is the difference between the amount of premiums collected, on the one hand, and compensation paid for damage, on the other. Based on the random realization of risks, insurance can achieve high profitability as long as damage compensation is relatively limited. By accumulating the excess premiums and (legal) reserves during the boom years in which they recorded few claims, insurance companies have become powerful financial institutions. Over the decades, the insurance industry has acquired real financial power.
15 In the field of insurance, the concept of damage is defined as “an attack on the int (...)
11In reality, insurance covers the risks before (ex ante) and after (ex post) the occurrence of a claim15. But its primary role is to intervene when the insured event occurs and to compensate for its consequences. In other words, the risk becomes real the moment the damage appears. The real issue of insurance is the materialization of risks. By covering the costs of damage, insurance establishes the monetary link between the potential risk (virtual and theoretical) and the manifest risk (the loss). This is precisely the economic anchor point for risks.
16 We also speak of “moral hazard”, linked to the negligence of an insured to protect himself against the risk (...)
12Insurers also participate in risk prevention. They tame the risk, prepare the actors for its advent, which they make predictable, presentable or acceptable. Certainly, insurance encourages people to live with risk, since it promises to repair damage, but at the same time, it dissuades people from taking reckless risks and encourages policyholders to observe prudent behavior in order to avoid losses16.
17 Swiss Re, “Alternative risk transfer (ART): state of play”, Sigma, nº 1, 2003, p. 15.
13Faced with the most well-known and most frequent risks, insurance distributes “uncertainty” among the various risk carriers, guaranteeing compensation for damage17. To be able to cover the risks, insurers seek the optimal distribution of costs between policyholders affected by the same risk (for example, motorists), or by the transfer of claims costs to investors not directly involved, but interested. by a financial gain offered by insurance companies. The contributions (premiums) provided for the performance of the insurers are also distributed among all policyholders by applying the law of large numbers.
18 Tribune de Genève, December 17, 2003.
14In some cases, insurers - in particular reinsurance companies - put pressure on their policyholders to adopt responsible behavior that reduces risks, the consequences of which can be socially and ecologically serious. For example, the Reinsurance Company (Swiss Re) of Zurich, recently approached large companies to encourage them to adopt production methods that reduce their greenhouse gas emissions, by threatening the recalcitrant of a considerable increase in their premiums. In these cases, the insurer takes active information or prevention measures; as a last resort, he can refuse to cover certain risks. The interventionist attitude of insurers is dictated by necessity. Indeed, major insurance companies note that the cost of catastrophes has risen sharply for several decades. This development leads to an increase in the sums disbursed for indemnities which entails financial consequences which can threaten their solvency and even cause their bankruptcy. For example, the costs of the 350 natural and man-made disasters recorded in 2002 were particularly high. According to the estimates of the large insurance companies, the damages amounted to 65 billion francs (against 40 billion in 2001), of which 17 billion were paid by the insurers18.
4. Large-scale risks are a game-changer
19 Cf. OcCC (Consultative body on climate change), Extreme events and climate change (...)
We speak of large-scale risks to qualify certain natural and technological risks. Patrick Lagadec and Ulrich Beck, among others, have described their characteristics very well. These “extreme events” 19, as natural disasters are called, suddenly and seriously threaten both the population and the environment. In this, they induce a change of scale in space and time.
20 Patrick Lagadec, The civilization of risk: technological disasters and social responsibility, (...)
16The first author, Patrick Lagadec, coined the term “major technological risk” to qualify these risks, the consequences of which are potentially very important but the probability of which is small20. These new risks are rare, but can occur at any time and cause great damage. These are “proliferating” risks which, if they occur, act as a multiplier, and their consequences may exceed the financial capacity of insurance companies to compensate damage. The "domino effect" is particularly feared.
21 Ulrich Beck, “From industrial society to risky society”, Revue suisse de sociologie, no (...)
17The second author, Ulrich Beck, shows that our society is evolving towards a society of “incompressible risk” in which this mode of protection paradoxically diminishes as the scale of the danger increases. Faced with this type of risk, the community could become a “society without insurance”. The possible damage involved is “unlimited, global and often irreparable, which removes all meaning from the idea of monetary compensation” 21. Moreover, this same author notes that the accident no longer has any limits (spatial and temporal) and therefore changes its meaning: it becomes an incident of which we see the beginning but not the end, "a riot of rampant destruction. , galloping and superimposed on each other ”. However, this means that there are no longer any criteria for normality or measurement methods and therefore no basis for evaluating the dangers. We compare what is not comparable, the evaluation becomes concealment. According to Beck, there would be a confusion of two centuries: the dangers to which we are exposed are from this century and the means by which we promise to control them to ensure our safety belong to another century, a legacy of industrial society of the nineteenth and nineteenth century. early twentieth century.
22 The list of disasters (especially natural and technical) of the last decade is growing every (...)
23 In the classification of insurers, the catastrophe is a claim for which the amount of insured losses (...)
The proliferation of major natural or technological catastrophic risks, taken into account for some forty years, poses new challenges for insurers and policyholders22. Given the magnitude that ecological and technological disasters can take, the limit of the insurability of certain risks may be reached. It is the ever-increasing amounts of compensation that threatens the financial capacity of insurers23. It is not surprising that premium escalation usually occurs with each occurrence of a natural or technological disaster. Following a major disaster and depending on the damage suffered, insurers decide to increase their premiums from 80% to 200% (as was the case for example after the explosion of the AZF factory in Toulouse). The increases in premiums weigh heavily on the profitability of companies and put them in a dilemma: either they accept the increasingly high charges that they have to pay for risks, or they find a new solution in terms of insurance coverage. their risks.
24 Cf. Gilles-Eric Séralini, Genetically incorrect, Paris, Flammarion, 2003, p. 264.
25 The two examples were presented during the International Biotech Forum, Conference on Risk Perceptio (...)
19The example of the contamination of seeds (non-GMO) by StarLink, a genetically modified product not authorized for human consumption, illustrates the multiple repercussions in the food chain of a handling error24. A similar case, a GMO containing a swine vaccine that mixed with soybeans, cost US $ 3.75 million to ProdiGen of Texas, its manufacturer25.
The StarLinkTM Contamination Case
In the field of plant biotechnology, the amounts of damages can quickly grow to a considerable financial extent, as the “StarLink” case shows. The "StarLink" brand designates a variant of Bt maize (Bacillus Thuringensis), resistant to herbicides, developed by Aventis CropSciences (subsequently acquired by Bayer), whose release authorization was limited to animal feed, and prohibited by consequent to human food. This ban was motivated by the presence of a suspected allergenic protein (Cry9C). In September 2000, an American non-governmental organization (Genetically Engineered Food Alert - GEFA) denounced the presence of “StarLink” in Kraft Food tortillas. It turned out that the flour (non-GMO) used to manufacture the product was contaminated with "StarLink". As a first step, Kraft Food withdrew 2.5 million packages of tortillas from the market. Subsequently, all manufacturers of tortillas and similar products (around 300 products ..) also had to withdraw their products from the market. In addition, the contaminated seeds must have been burned. The cost of this "accident" is estimated to have exceeded one billion US dollars. Sum which is considered to be the highest to date in the history of GMOs.
20 Multinational industrial companies are exposed, by their size and their activities, to high risks that insurers hesitate to cover or, conversely, large companies give up paying ever higher premiums to insure, believing that this capital could be better invested. In reality, companies are obliged to assume and insure multiple risks, because they cannot remain without insurance: a major accident, for which they would be responsible and which they would have to compensate, could lead to their bankruptcy. As part of their risk insurance policy, they must decide which risks they must insure, at what price, with what method, and thus establish their insurance portfolio.
21In order to be able to cope with new major risks, the insurance industry has had to develop new methods of risk prevention or transfer. We can observe that the imagination of insurers and large companies exposed to technological and environmental disasters (such as the petrochemical or chemical industry) is boundless in the invention of new formulas for avoiding or covering risks on a large scale. . The assumption of new risks can follow several paths, in particular the self-insurance (or self-financing) of the companies, the risks syndicated by several insurance companies and the transfer of the risks to the financial markets.
Several large companies have decided to come together and self-insure, instead of using the services of insurance companies. Self-insurance can take several forms, such as pools or captives which allow major risks to be shared or pooled between their members. Thus, insurers transfer part of the risk to large multinational companies. For example, a large group can create its own insurance company and insure itself with it (captive insurance). But traditional insurance companies are not completely discarded, they will remain present in the process to “support” their clients as risk consultants. A particular form of insurance sees the company and the insurance linked by a long-term contract where the premiums are put in a common fund. In the event of a claim, the insured is reimbursed for the damage suffered, but the insurance keeps the premiums; otherwise, in the absence of a claim for a specified period, the insured may recover part of the premiums.
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