Reinsuring Catastrophe: The Business and Politics of Reinsurers in Times of Climate Change and Financialization

• Applicant: Professor Dr. Sebastian Kohl
• Subject Area: Empirical Social Research
• Term: since 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 544466493

Reinsurers insure direct insurers against excess losses by diversifying risks across the globe and thus spreading direct non-life and life insurance. Recently, this economic background function has come to the fore of media attention as the rise in reinsurance premiums and even retreat from markets too exposed to climate change has made entire areas and branches uninsurable. Due to their global focus on excess losses, reinsurers have been in a unique position to document and be subjected to climate catastrophes, while they themselves have become increasingly intertwined with capital markets through catastrophe bonds and financial investments. This project aims to uncover the often-hidden financial giants in the reinsurance sector to understand how they reacted to climate change and ongoing processes of financialization. In a first working package, it therefore proposes to build a new database from reinsurance supervision authorities and public reporting to uncover and quantitatively describe the main long-run international trends of the reinsurance sector, covering the main dimensions of reinsurers operating business, financial investments and public stock performance in light of increasing catastrophic losses. This will lay the groundwork for a more qualitative understanding of how reinsurers reacted to climate change and financialization pressures. Working packages 2 and 3 then zoom in on the internal processes of the two biggest world reinsurers, Swiss and Munich Re, through interviews, archival work and process tracing, to understand how these actors have coped with climate change and financialization. Working package 2 will analyze how the firms came across climate-related anomalies starting in the 1970s, built internal risk units and – unlike the oil industry – soon went public with their findings from loss statistics. It will ask how firms reacted epistemically but also in business terms to these findings. Working package 3, in turn, will look at the parallel process of financialization: how did the ‘big two’ become increasingly reliant on catastrophe bonds sold on financial markets and on investment revenue to bail out catastrophe losses? How have they themselves tried to extend financial markets through backing micro-insurances against climate risks in countries in the Global South? Overall, the project looks to contribute to debates in the sociology of finance (and insurance), to business-power approaches and climate sociology, which all have tended to ignore the large reinsurance sector.

• DFG Programme: Research Grants
• International Connection: Sweden
• Cooperation Partner: Privatdozent Dr. Dieter Plehwe