Paying ex gratia: Parametric insurance after calculative devices fail

Abstract

The past decade has seen the dramatic proliferation of geospatial tools to remotely monitor, measure, and transfer weather and climate risk, particularly in the Global South. These “parametric” tools are calculative market devices used to commodify risk and facilitate its distantiated exchange via insurance markets. Yet the environmental estimates they generate are frequently wrong, sometimes grossly so. This paper investigates what happens after calculative market devices fail, analyzing so-called ex gratia (“from grace”) practices in which insurers make payouts to aggrieved clients even when none are due under contractual terms. Though these payments are commonly deployed to dispel discontent, these “public secrets” of the industry have gone unnoticed in insurance scholarship. This paper documents numerous ex gratia payouts in parametric programs across Africa, disputing the myth of autonomous insurance markets that function according to formal, transparent rules administered by dispassionate calculative devices. Instead, these “discretionary” monetary transfers reintroduce human decision making in informal, black-boxed ways, cloaking the inadequacy of the parametric contracts they shore up. Far from incidental, I argue that these practices have been constitutive of the parametric insurance market's persistence and expansion. Though ex gratia payments sometimes give rise to negotiations over indemnification with aggrieved collectivities, these unfold on insurers’ terms, informalizing power and delegitimizing complaint. The growing emphasis on parametric insurance as a tool for climate adaptation makes it all the more important to excavate the mechanics and politics of ex gratia, and to relinquish expectations that geospatial algorithms alone can resolve questions of post-disaster redistribution.