Insuring War

Sovereignty, Security and Risk

Luis Lobo-Guerrero

• Publisher: Taylor & Francis
• Year: 2012
• Print ISBN: 9780415739207
• eBook ISBN: 9781136330940
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: City Planning & Urban Development
• Index: Politics & International Relations

Insurance is a central, if until now ignored, instrument of war in the modern period. Ever since the eighteenth century, interaction between governments and insurers in Western countries has materialised in the form of war risk schemes that have contributed to the waging of war and the preservation of peace. The operation of those schemes has given rise to a curious, if not innocent, association between practices of statehood and practices of risk, which are theorised here under the label of 'insurantial sovereignty'.

The book draws on the British experience of using maritime insurance as an instrument of war during the Napoleonic Wars, the two World Wars, and the early twenty-first century. It asks, what happens, when, under conditions of war, the sovereign adopts insurantial imaginaries and practices into its rationalities of government? In doing so the book makes a novel contribution to the understanding of liberal security and liberal governance which is central to the theory of Political Science and International Relations, the understanding of international political sociology, and international political economy.

The book follows Insuring Security: Biopolitics, Security and Risk as the second of a trilogy that analyses how concepts and practices of power, risk and security materialise in the form of insurance as a central instrument of governance in the liberal world.

Insuring Security:

https://www.routledge.com/Insuring-Security-Biopolitics-security-and-risk/Lobo-Guerrero/p/book/9780415522854

Insuring Life:

https://www.routledge.com/Insuring-Life-Value-Security-and-Risk/Lobo-Guerrero/p/book/9780415716079

1 Introduction

Insurantial sovereignty

De futuris contingentibus non es determinate veritas.¹

The last three centuries of Western political historical experience have witnessed the emergence and development of a form of sovereignty that until now had remained unexplored. It is a kind of sovereignty that creatively combines traditional technologies of security such as defence and diplomacy with forms of actuarial thinking and practice. In doing so, it portrays a rationality of government which relies on the interpretation of uncertainty in terms of risk and seeks to manage it in productive ways. As a form of sovereignty, it relates to the promotion and protection of political community and the portrayal of economic expressions of life in the way of political economies. Such sovereignty, which is central to the understanding of contemporary liberal governance, is here analysed under the name of ‘insurantial sovereignty’.

Insurantial sovereignty is an expression of what has been analysed in the wider governmentality and risk society literatures as the political management of risk (e.g. Beck 1992; Daston 1988b; Hacking 1990; Knight 1921; Luhmann 1993; Moss 2002; O’Malley 2004; Dean 1999; Dillon and Lobo-Guerrero 2008a; Rose 1999; De Goede 2008b; Ericson and Haggerty 1997; Baker and Simon 2002; Dillon 2008). It constitutes a vast phenomenon with multiple manifestations in different historico-political experiences. The most prominent have so far been the forms of welfarism that emerged in late nineteenth century Europe. This form of insurantial sovereignty refers to the need to sustain social and political peace in an age of revolution. The biopolitics of the welfare state, evident for example in the Bismarckian project, were related to a rationality of government concerned with the governance of populations experiencing dramatic economic and social change as a result of industrialising processes. As suggested by Wagner for the case of late nineteenth century Austria, interventions at the biological–medical level contributed to counter the political-historical dimension of dialectical accounts of revolution based on class struggle (Wagner 2009: 21). Defert, writing on the development of accident insurance schemes in the same period in France, commented that these schemes aimed at ‘providing bourgeois solutions to proletarian problems’ (1991: 212). Ewald noted for the same case that actuarial strategies for socialising risk lied at the core of the idea of government (Ewald 1986). The formulation and development of those schemes, which are quite particular to the specific development of western societies, evidence the productive interaction between the political and the insurantial through a rationality of government of risk management of which not much is yet known.

A second manifestation of insurantial sovereignty, although widely related to the first, is that of the insurability of lives. In the last three centuries of the Western political experience life insurance has been a central vehicle for the transformation of the vital economic and productive potential of individuals and populations into investment capital. Life as investment capital has been required to advance many of the individual and collective ventures that have characterised capitalist systems (e.g. mortgages to acquire property, shipping ventures, construction projects and state funding in the form of annuities). This is so, as will be analysed in detail in the third volume of this trilogy, because as a form of security life insurance enables the credit required for capitalist economic growth. Capitalism is here understood not as a single economic or political system but as noted by Nigel Thrift, as ‘a set of networks which, though they may link in many ways, form not a total system but rather a project that is permanently under construction’ (2005: 3). By investing in lives, a practice that has been subject to the regulation and moral control of states in varied ways, life insurance became a site of sovereign intervention and regulation of vital capacity which was to become a definitive feature of western liberal economies.

A third site for the production of insurantial sovereignty, the subject matter of this book, is that of insurance and war. It constitutes a space from which to study the ways in which forms of insurance, and moreover, imaginaries of insurance (Ewald 1991), have been complicit in making possible expressions of sovereignty such as the waging of war.

Although relationships between insurance and war have attracted relatively little academic attention (with the exception of Clark 2004a, b; Kingsley 1911; Royce 1914), evidence of them abound. For example, insurance has been used in modern warfare as an intelligence instrument and also as a source for the funding of war efforts. A prominent case in point is that of Germany during the Nazi period. Gerald Feldman’s historical study of the collaboration of the insurance company Allianz with the Third Reich between 1933 and 1945 demonstrated how life insurance records were used to expropriate the capital invested in the lives the regime had decided to destroy (2003: e.g. 236–277). Feldman narrates how actuarial records were use to locate and expropriate assets of ‘the enemies of the people and the State’ such as Jews and communists at home and in the conquered territories (2001: 391–395). The history of Allianz during that period closely illustrates the ways in which the insurance industry was employed as a means to further the interests of the regime.

The relationship between insurance and war for the Third Reich was even more complex and has the potential to contribute to a different political understanding of the war effort, as recently declassified documents in the United States National Archives seem to indicate (US National Archives 2011). According to Fritz, German companies at the beginning of the war controlled close to forty five per cent of the worldwide reinsurance industry, an element which provided the regime with a valuable source of information on the lives, property and assets of many enemy, as well as friendly countries (2001b). Although a private business, the influence of the Nazi regime transformed the informational resources of the industry into intelligence material with which to dominate the economic spheres of the conquered territories.

Insurance practices also proved useful in the Allies’ counter-intelligence efforts. For example, the American X2, part of the Office of Strategic Services (OSS) created to coordinate espionage activities behind enemy lines, established in 1943 a small Insurance Intelligence Section which proved its value in acquiring the blueprints of several industrial facilities, some even within concentration camps, for which reinsurance was being sought in the market (Fritz 2001b). Based on neutral countries, intelligence agents with an insurance background sought to underwrite enemy assets as a way of identifying targets of strategic relevance to the enemy (see Naftali 1993; Fritz 2001a: A1, Section National/Foreign).

The use of insurance for intelligence purposes was not restricted to Germany and to the Allies. Through declassified documents in the United States it is now known, for example, that in 1941 ‘the San Francisco office of a British insurer resold coverage of the Panama Canal. . . to two Japanese firms’. A report of the OSS mentions that ‘[i]n connection with this insurance, there was forwarded to Tokyo a detailed description of the locks, all machinery in connection therewith, exact location, etc.’ (as cited by Fritz 2001a: A1, Section National/Foreign).

These experiences in employing insurance as an instrument of war are but an example of an intimate relationship that has developed between practices of statehood and the use of actuarial resources as instruments for government. Those relationships, as will be shown later, have their origins in late seventeenth and early eighteenth century efforts to encompass developments derived from the Probabilistic Revolution into strategies aimed at balancing moral economic orders with the political economies of states. In the process, the primordial governmental concern of achieving security within and outside the state gave rise to the wider phenomena detailed here as insurantial sovereignty. Rather than seeking to analyse this form of sovereignty in the abstract and the general, this book concentrates on exploring insurance and war relations in the specificities of the British experience of employing maritime insurance as an instrument of war beginning with the Napoleonic Wars and ending with the twenty-first century.

As detailed in Chapter 2, maritime insurance and its use in time of war in Britain goes back to the long eighteenth century and is part of a wider interaction between financial actors at the City of London and political actors represented at Westminster. Through such interaction an alliance of power developed which materialised in the creation of a commercial empire lasting until the first half of the twentieth century (see, e.g. O’Brien 1998, 2000). Central to the political economy of empire that emerged out of these power relations was the relationship between the resources and strategies needed for the projection of naval and military power and those required for international trade. Such interaction is evident in a notable feature of the late mercantile era which has attracted the attention of numerous economic and political historians. It is the fact that while Britain sustained protracted war efforts abroad at a high cost to the public purse, a system of domestic liberties and parliamentary control of the state developed (Stone 1994: 6–7). Presented in the literature as the ‘Brewer Paradox’, the balance between public and private power that characterised the system was mediated to an important extent, by insurance imaginaries, practices and products – an issue which remains vastly under-researched. While insurers, as merchants, acquired significant amounts of government debt, mainly in the form of Navy bonds, they became increasingly active in affecting the security strategies, tactics and environments of an international sphere on which international trade depended. By interacting with government entities and officials they slowly developed an active partnership with the state, which under today’s terms could be understood as a partnership in risk management. Its effects were felt at strategic, tactical and operational levels through which the Committee of Lloyd’s of London and its members portrayed their commercial interests. Their activity involved issues as diverse as intelligence gathering and sharing, investment in government debt, the provision of a basic form of social welfare and the recognition of acts of gallantry by naval and merchant officers. The details of this partnership which materialised a form of insurantial sovereignty in the late eighteenth century, are made explicit through the interaction between Lloyd’s of London and the Board of Admiralty during the Napoleonic Wars, detailed at the end of the chapter and evidenced through correspondence sustained between these two bodies. However, in order to understand the significance of that partnership in the politics of empire, it is important to begin by analysing the significance of insurance practices and relationships as a moral economic issue. To do so the chapter starts by offering a genealogy of the moral economy of insurance starting in the early seventeenth century.

Chapter 3 moves on to consider a different form of insurantial sovereignty that resulted, this time, from the use of maritime insurance as an instrument with which to endure a war effort, both domestically and internationally. It is the case of the War Risks Insurance Scheme of World War One, a result of years of public debate on the role the government should play in ensuring the continuity of shipping during a European war. Through the scheme, the British government agreed to reinsure 80 per cent of British hulls and to offer insurance on all their cargo in an attempt to keep the merchant fleet sailing under the threat of enemy action. Analysis offered in the chapter demonstrates, however, that the problem exceeded naval and military considerations and extended to one of security of credit and food supply in time of war. This in turn made evident the government’s anxieties with regards to internal riots as a result of elevated food prices. Although the scheme was only used for the first two years of the war, in bringing together a domestic and an international security agenda in an attempt to wage war under liberal principles, the use of maritime insurance as an instrument of war reveals a form of insurantial sovereignty understood as risk management. The rationality underlying the scheme, analysed in the chapter through the details of the debates that led to its adoption, was to become a precursor of liberal governance in what is widely presented in the late twentieth and early twenty-first centuries as the risk society.

In Chapter 4 the form of insurantial sovereignty as risk management noted above is examined in the interwar period and in light of preparations made for the following world war. The liberal principles that supported the scheme are put to the test in an international environment characterised by growing protectionism, changes in property relations as an effect of the Soviet Revolution in Russia, the economic crisis that derived from the crash of 1929, and the general difficulties in insuring against political risks made evident in, for example, the losses incurred by insurers in the Spanish Civil War. The resulting scheme, adopted at the outbreak of the war, created first an insurantial state of exception, which, as the confrontation evolved, became permanent legislation in an attempt to protect what is presented in the debates that led to scheme as the insurable national interest. As legislation, part of which still stands in 2011 as a central component of national security, the scheme shrouded a complex rationality of government which needs to be made explicit. The events and debates analysed in the chapter illustrate how the national interest is not an ontological category but the result of intense and complex negotiations of what will be described below as radical relationality, between the parties of what became a sovereign risk management scheme. What is presented under the general idea of national interest is in fact a relationship of power, that, although adopting legal forms, shapes security environments and produces a form of insurantial sovereignty that has now been ‘norm-alised’ under national security arrangements. The chapter concludes by reflecting on the effects of the form of insurantial sovereignty that resulted from the war on two concepts which are central to the theory of International Relations: economic power and the national interest.

Taking a distance from the normalisation of insurantial sovereignty and the strictures of national security of the last half of the twentieth century, the book moves on to analyse the role of contemporary maritime insurance as a security instrument to protect against phenomena such as maritime piracy in the Indian Ocean basin. The case explored blurs the territorial understanding of sovereignty typical of disciplined studies of Politics and International Relations, and as noted in the chapter, poses novel political economical questions. Based on insurance industry documents and interviews, the latest changes in the maritime insurance environment are analysed in detail. These include, for example, the complexities of defining piracy risk and of removing piracy from standard shipping policies and including it into ‘war risks’ at a time in which the understanding of international war is changing dramatically. The changes, and, more importantly, the discourses and practices with which piracy risk is being approached, denote a change in the rationality through which the uncertainty surrounding global maritime circulation is tackled. For example, insurers are moving beyond the traditional state-spheric approach to security in their understanding of wider risks and are resorting to alliances with wider actors that, although encompassing traditional state structures, provide a wider world-view more in tune with insurers’ global interests. A case in point is a growing interaction between Lloyd’s of London as a marketplace with NATO as a military alliance on issues as wide as piracy, climate change and cyber-security. The shift in rationality is also evident in the role of the insurance broker, which is now expected to transcend its commercial role and operate as an expert liaison between the security requirements of clients with the increasingly technical demands on risk management required by insurers. The emerging regime is giving rise to new understandings of international security that are premised more on a political risk market than on national security grounds. Under these circumstances state actors are to be understood in their relationship with brokers and insurers and the wider financial sector which are currently experiencing unknown crises. The form of insurantial sovereignty arising from this regime is yet unknown and its theorisation will require knowledge resources that transcend grand conceptualisations of power.

To that end, Chapter 6, in concluding the book, takes stock of material introduced in previous chapters to develop a theorisation on insurantial sovereignty challenging the idea of ‘the international’. The theorisation is based on the ideas introduced below as a way to understand the effects of insurantial sovereignty in the analysis of historical and contemporary global politics. Readers who are more interested in the cases noted above are advised to move on to the relevant chapters.

The Probabilistic Revolution and the security of risk

The premise upon which this book is written is that insurantial sovereignty is a political effect of the Probabilistic Revolution. Much has been written within International Relations about the Peace of Westphalia as the founding myth of European sovereignty upon which a structural condition of anarchy in the international system derived (e.g. Teschke 2003). Much has been written as well about how the Jus Publicum Europeum became a foundation of war amongst equals within a ‘comprehensive spatial order’ which fell into crisis with the advent of the First World War (e.g. Schmitt 2003: 140–210, 227–237; Hooker 2009; Odysseos and Petito 2006; Odysseos and Petito 2007; Rash 2005). From then onwards attempts to theorise the new ‘nomos of the earth’, in the form of the disciplined study of International Relations, evolved, from the efforts of the inter-war period into the analysis of bipolarity of the Cold War heavily influenced by realist, neorealist and liberal perspectives, into the 1980s. Towards the end of that period and beyond the trauma the Cold War meant, for International Relations (e.g. Gaddis 1993), the discipline began to move beyond its state-centrism incorporating many so-called post-structuralist aspects of power, a trend that consolidated way beyond 9/11. Within these writings, however, compendiums of which can be found in most comprehensive textbooks on International Relations theory, the political effects of the Probabilistic Revolution, a central constitutive aspect of the modern period, has been surprisingly absent.

The probabilistic revolution was part of a wider intellectual transformation in late seventeenth and early eighteenth century Europe which involved, in the words of the Bielefeld collective,² ‘a new pragmatic rationality that abandoned traditional ideals of certainty; and a sustained and remarkably fruitful attempt to apply mathematics to new domains of experience’ (Gigerenzer et al. 1989: 1). These transformations materialised in the unfolding of a form of mathematics with which the probability of occurrence of future events could be measured (see, e.g.: Krüger et al. 1987a, b; Gigerenzer et al. 1989; Daston 1988a; Hald 2003; Hacking 2006). The very possibility of dev...

Table of contents

• Cover
• Title page
• Copyright page
• Dedication page
• Contents
• Foreword
• Preface
• Acknowledgements
• 1 Introduction: Insurantial sovereignty
• 2 Maritime insurance, the security of credit and the British state at war during the Napoleonic period
• 3 King’s enemy risks, maritime insurance and strategy in the First World War
• 4 The war risks insurance regime of World War Two and the constitution of the ‘national interest’
• 5 Insurantial sovereignty beyond the state: Lloyd’s and maritime insurance at the start of the twenty-first century
• 6 ‘Insurantial sovereignty’ and the re-constitution of ‘the international’
• Notes
• Bibliography
• Index