Does forgetting make markets? Historical silence in the political risk insurance market

This chapter is concerned with understanding the history and operation of the market for political risk insurance, and the related political risk analysis industry that provides metrics, narratives and pricing prosthetics which are used by insurance brokers and underwriters when they negotiate terms and prices for the cover they provide. These prosthetics include a variety of colour coded ‘heat’ maps, indices, and geographical categorisations (such as ‘Sub-Saharan Africa’, ‘MENA’ – Middle East & North Africa, or ‘Asia-Pacific’) which do not determine the pricing of political risk insurance cover, but rather act as ‘technologies of the imagination’ (Gilbert, 2020a) and spur imaginative effects particular approaches to valuation. As political risk insurance (PRI) brokers and underwriters would themselves argue, PRI does not lend itself to an actuarial mode that seeks to predict the likelihood of future ‘political risk events’ based on statistical tabulation of past occurences. Instead, pricing decisions are provoked by technologies of the imagination like the scoring systems and narratives produced by political risk analysts, which tend to measure a standard set of country risks (including currency convertibility and sovereign credit risk), as well as political risks typically centring on Confiscation, Expropriation, Nationalization and Deprivation – the ‘CEND’ risks. But these categories of insurable risk do not merely reflect a fixed prior reality to which an accurate label has been given; the risk of expropriation for example does not exist outside of chains of practices through which insurers and analysts codify such risks as part of an attempt to enact a world in which such a risk is indeed insurable (see Law 2009). Law (2009: 241) draws our attention to the ‘hinterlands’ through which knowledge becomes stable. Precisely because PRI is not amenable to actuarial pricing, and because PRI underwriters and brokers rely upon maps, indices and geographical categorisations in order to price political risks, understanding the market for political risk involves tracing out histories and hinterlands in a number of directions. Therefore, this chapter proceeds as follows: Firstly, I trace out the origins of the PRI industry, and the innovations through which a set of brokers and underwriters in 1970s London breathed life into new categories of insurable risk (notably, the CEND risks). Secondly, I highlight the relationship between the narratives and categories used by political risk analysts (upon which insurers rely), and imperial ‘area studies’ in the UK and USA.