In order to cope with major risks, reinsurance companies occupy a preponderant place in major risk insurance. As “insurers of insurers”, they constitute the last link in the coverage of risks and the financing of damage that has occurred. Sometimes the financial capacity of a single company is insufficient and several companies have to join together in syndicates to insure risks on a large scale.
As a preventive approach, some insurance companies offer their clients - mainly large industrial companies - services provided by a group of specialists (chemists, engineers, technicians) capable of pinpointing organizational or process weaknesses. production that present significant potential risks and establish upstream safety specifications or organize rapid rescue in the event of an accident.
In exceptional cases and in the absence of financial cover for major damage, such as floods or earthquakes, the State becomes the “superinsurer” or payer of last resort. But the state also has an active role to play. It can institute compulsory insurance (such as fire insurance) or grant subsidies with a view to promoting the insurance of certain risks or promoting prevention. In any case, State intervention in the areas of risk and coverage of residual or uninsured damage is done in the name of national solidarity26.
27 Aronson Daniel, "Insurers are sounding the alarm", Alternatives économique, nº 174, oc (...)
Finally, when the foreseeable costs of catastrophes seem to endanger the financial equilibrium of insurers, the latter may give up insuring a company that presents significant risks. This is the case with major technological risks or unforeseeable catastrophes, which strike suddenly and whose effects can be irreversible. This type of risk is generally excluded from insurance contracts. For example, the big insurers like Munich Re or Swiss Re have not agreed to insure Monsanto and Novartis for the risks of genetic pollution, simply because they do not know how to assess or quantify their financial consequences27.
28 According to estimates, the alternative risk transfer market has reached 88 billion dollars (...)
29 The vocabulary of insurers is teeming with technical neologisms, practically incomprehensible to (...)
30 Swiss Re, Annual Report and Management Report, 2002.
23A new phase is opening in insurance activities with “alternative” risk transfer (ART), which combines insurance techniques and financial tools28. International insurers and reinsurers have been particularly inventive in developing a whole series of services that combine banking instruments with insurance, which they then offer to their clients, usually large multinational groups, their aim being to transform the insurance industry. a risk in various sophisticated financial products that they offer to investors29. The new techniques of financial reinsurance aim to transfer significant risks to the financial markets. These include, in particular, financial services to insurance companies, risk financing offered to multinational companies, claims handling and the management of companies that undertake the self-insurance of the risks of multinational (captive) companies 30. These methods allow the insurance risk to be redistributed among a large number of shareholders, who buy the corresponding securities in the hope of making a profit. From transfer to transfer, the stock market thus becomes the central place for assuming major risks. Gradually, insurance companies are moving away from their initial profession of insurer, to take on the role of specialist in financial engineering. It is no longer the material risk which is the main concern of the large insurers, but the capital risk. The insurer disappears behind the financier and indulges in speculative financial arrangements which seem to be “finance-fiction”. Here is an example:
31 Swaps are well known in the financial field, allowing banks to protect themselves against (...)
32 Swiss Re, Annual Report 2002 and Management Report, p. 10.
Swiss Re and Tokyo Marine signed the swap contract31 under which $ 550 million in Japan earthquake and typhoon risk was swapped for California earthquake, Florida hurricane and storm risk in Europe. Made possible by recent advances in risk modeling technology, this transaction means a more balanced risk profile for both partners and thus allows them to optimize the use of their capital32.
33 See Godard et al, op. cit. pp. 411-414, for more detailed explanations on CATEX.
24This example shows that reality can go beyond fiction when insurance companies borrow speculative financial instruments developed by banks. He indicates that the insurers have set up an instrument which allows the exchange of insurance contracts guaranteeing earthquake risk coverage against contracts of the same nature from another insurer. The basic condition of such a transaction, known in the financial markets, is the existence of an institution (a stock exchange) where one can carry out the exchange of contracts which are treated like other securities (shares or obligations). The first stock exchange specializing in the trading of catastrophic risks and in the transfer of risks, the CATEX (Catastrophe Risk Exchange) was created in 1996 in New York. It is open to risk carriers (insurance, reinsurance, brokers, captive companies of multinational companies), with the aim of diversifying their exposure to risks33.
34 Godard et al., Op. cit., p. 547. See also Christian Schmidt, “Risk and uncertainty: a no (...)
35 The notion of “financial capitalism” occupies, with market capital and industrial capital, a (...)
25However, the use of financial derivatives does not necessarily lead to a gain for the company, because it can take a position in the market which can lead to a loss. In this case, the original (material) risk is doubled by a financial risk for the insured. It is in this sense that "the novelty of these (financial) instruments makes the uncertainty (in the sense of Keynes and Knight) which is attached to them more worrying" 34. In fact, seeking financial cover for catastrophic risks through the financial markets helps to conceive of risk as if it were a "thing" or a commodity. With the increasingly widespread creation of financial instruments - insurance linked securities or catastrophe bonds - (re) insurers are becoming one of the main players in globalized financial capitalism. They transforming into financial institutions with speculative purposes 35.
26The fact remains that the various clever financial arrangements (and of great technical complexity) probably constitute the last step in insurability and in covering large risks.
5. Insurability versus irreversibility
36 Laurence Engel, Responsibility in Crisis, Paris, Hachette, 1995, p. 7.
37 Genetic engineering techniques make it possible to modify the genetic heritage of organisms (...)
27The dazzling development of new technologies (in particular genetic engineering) which reveal "a tendency to infinitely extend risks" opens a new chapter in insurance policy vis-à-vis risks "36. Indeed, the new major technological risks are becoming ever more uncertain, broader and more threatening (a situation called “radical uncertainty”). For example, the hypothetical risks - because they are indefinable, elusive and unpredictable - associated with genetically modified organisms (GMOs) pose crucial problems for both users and insurers37.
38 In this regard, we refer to the argument developed by Mark Hunyadi: “As by definition, the cha (...)
39 Patrick Lagadec, in Demarcq François, “The major technological risk”, Economic problems and (...)
40 “GMOs and irreversibility”, in Gilles-Eric Séralini, Genetically incorrect, Paris, Flammarion. 20 (...)
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