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The Financialization of Environmental Risks through Catastrophe Bonds: A Spatial-Temporal Evaluation

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Hazime_Nadia_.pdf (1.34 MB)

Date

2017-08-24

Authors

Hazime, Nadia

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University of Waterloo

Abstract

As natural disaster risks continue to increase as a result of climate change, insurance companies and other institutions struggle to find ways to deal with these risks. There is a propensity for these risks to be financialized and distributed through the market. Catastrophe bonds are indicative of this trend for environmental problems to be represented through financial and market instruments. This thesis expands upon the critical literature surrounding catastrophe bonds through an analysis of the bonds themselves, acting as an exposé of their nature and processes. It explores how environmental risks are being financialized while exposing the separation of the temporal and spatial aspects of natural catastrophes that manifest through this process. This research consists of an in-depth deconstruction and analysis of catastrophe bonds in addition to qualitative interviews with three catastrophe bond experts. It makes use of relational economic geography to map the processes, actors, and infrastructure of catastrophe bonds to offer a critique of their development and function. It analyzes these bonds from creation to distribution through three mechanisms of financialization: ownership, commensuration and mobilization. This thesis demonstrates how catastrophe bonds are a form of financialization and argues that transforming environmental risks into exchange values is a form of time-space compression. The separation of the spatial and temporal aspects of natural disaster risk from their exchange value can lead to distortion and undervaluation of these risks. Through this analysis of catastrophe bonds and the process of the financialization of environmental risk, this research aims to analyze these bonds as a mechanism for dealing with climate change risk. This research can be extended to other forms of financialization and offer a critique for the inclination to attempt to address environmental risks through market mechanisms.

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Keywords

LC Keywords

catastrophe bonds, financialization, natural disasters, emergency management, mathematical models, risk mitigation, risk (insurance), economic aspects

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http://hdl.handle.net/10012/12210

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Theses
Environment, Enterprise and Development