Paradoxes of protection: When insuring disaster sits between markets and society (Book-in-progress)

New Zealand is both one of the most risk exposed and also among the most insured countries in the world to ‘natural disasters’. During the 2010-2011 Christchurch Earthquakes, four major earthquakes and over 11,200 aftershocks shook the city; with the most serious in February 2011 killing 185 people and forever changing the city centre. At the time, just under 90% of New Zealand homeowners were insured for earthquake (EQ). This meant that the disaster, in a small corner of the world with a city of under 400,000 people, was the fourth most costly insurance event the world had ever seen. Insurance companies reeled over the fact that: “a small aftershock …[could] … trigger one of the largest insurance losses ever”. Fortunately, the payment of some 460,000 insurance claims supported reconstruction and helped to allay some of the tragic economic and social costs of the disaster. This is because a Protection Gap Entity, the New Zealand Earthquake Commission (EQC), had been established in the 1940s as a public insurance mechanism to ensure that homeowners could get EQ insurance that would have otherwise been uninsurable in a private market.

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In this presentation, we examine the work of Protection Gap Entities (PGEs); not-for-profit collaborations between governments and insurers around the world to provide financial protection from uninsurable disasters. PGEs work at the nexus of a fundamental tension between market objectives to insure risks for a profit and societal objectives to provide an insurance safety net. Using a paradox theory lens, we explain how PGEs navigate these tensions in the face of growing disaster, globally.

Our explanation is based on our research into 14 PGEs around the world. Between 2016 and 2020, we traversed the globe, both physically and virtually, conducting 456 in-depth interviews with stakeholders in PGEs. We collected PGE annual reports and delved into their histories. We also sat in on their meetings and workshops, increasingly as participants through keynotes, advisory roles and expert panels. And we experienced their effects as citizens and residents of countries where flooding, hurricane, wildfire, and earthquakes had very different implications for the insured and the uninsured. We will discuss how collecting and analysing these data has shaped us as scholars.