Crime is insurable, because insurers constrain the options of their customers by mandating or providing incentives to undertake certain precautions. However, for some niche products - such as kidnap for ransom and high value fine art - insurers must also discipline the perpetrators of crime. I show that specialist insurers at Lloyd’s of London have created complex polycentric governance architectures to order these criminal markets. Insurers retain the services of experts who help legal entities negotiate, contract, and trade with criminals and extra-legal organisations. The underwriting room at Lloyd’s serves as an information hub, which stabilises prices and facilitates reputation-based solutions for trades with prisoners’ dilemma characteristics. Insurers massively reduce the incentive for criminals to engage in crime and enforce behavioural norms to limit the cost of crime. This underpins the demand for insurance and ensures that it can be profitably supplied.
The Sociology Seminar Series is convened by John Ermisch and Federico Varese. For more information about this or any of the seminars in the series, please contact email@example.com.