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I build an equilibrium model trying to reconcile investor preferences with several features of the cat bond market. The driving force behind the model is a habit process, in that catastrophes are rare economic shocks that could bring investors closer to their subsistence level. The calibration requires shocks with an impact between −1% and −3% to explain a reasonable level of cat bond spreads. Such investor preferences are not only able to generate realistic cat bond returns and price comovement among different perils, but may also able to explain why cat bonds offer higher rewards compared to equally rated corporate bonds.

Using the case of the Deepwater Horizon blowout in the Gulf of Mexico in 2010, I argue that the catastrophe was less an example of a low probability-high catastrophe event than an instance of socially produced risks and insecurities associated with deepwater oil and gas production during the neoliberal period after 1980. The disaster exposes the deadly intersection of the aggressive enclosure of a new technologically risky resource frontier (the deepwater continental shelf) with what I call a frontier of neoliberalized risk, a lethal product of cut-throat corporate cost-cutting, the collapse of government oversight and regulatory authority and the deepening financialization and securitization of the oil market. These two local pockets of socially produced risk and wrecklessness have come to exceed the capabilities of what passes as risk management and energy security. In this sense, the Deepwater Horizon disaster was produced by a set of structural conditions, a sort of rogue capitalism, not unlike those which precipitated the financial meltdown of 2008. The forms of accumulation unleashed in the Gulf of Mexico over three decades rendered a high-risk enterprise yet more risky, all the while accumulating insecurities and radical uncertainties which made the likelihood of a Deepwater Horizon type disaster highly overdetermined.