Fair-Weather Finance: Historical Antecedents of Climate Risk Management

Objective

The insurance and reinsurance sectors, including institutions such as Lloyd’s of London, Swiss Re, and Munich Re, assert that they have the necessary instruments to address devastating weather events and climate catastrophe. In order to develop appropriate risk management instruments to protect against disruptive natural events, insurance companies have been conducting their own forms of research on weather and climate since the latter half of the eighteenth century. Over the past several decades, financial and climate risks have become increasingly entangled, especially so through instruments such as carbon trading, weather derivatives, and catastrophe bonds as well as myriad new forms of weather-related risk management like parametric insurance. Fair-Weather Finance investigates the role of financial institutions in the making of climate science. From eighteenth century marine insurance for sea risks, cyclones, and hurricanes to contemporary climate modeling used to demarcate geographies of disaster, insurance companies have measured atmospheric conditions and consolidated the records of a broad cast of actors to produce knowledge about climate and hedge against its financial threats. The project asks, what weather measurement tools, underwriting policies, and enforcement mechanisms were put in place by insurance companies against potential weather-related risk? How did they protect their assets during weather events, disasters, and climatic turbulence? Opening the actuarial archives to the study of weather knowledge production, the project aims to understand how the business of risk management structured conceptualizations of climate in different historical periods. The project will link the production of climate and weather knowledge with financial instruments developed by insurance companies, forming a historical basis for interdisciplinary work at the intersection between the history of climate science and financial history.