Insurance as a Living Commons

Repairing the Broken Calabash: A risk professional’s guide to commitment pools, parametric triggers, and polycentric support

People often ask me again and again how systems deal with people failing to pay back their share, or simply what happens when there is a disaster or an accident. When people that pull from the commons and don’t or can’t give back to it right away .. or never. The story of the rupture, the broken calabash, and so on.

Well, if you are a living person today you have probably heard of insurance (health, life, car, earthquake, fire … etc.). The oldest form we know (without a doubt) is being able to ask your friends, family, and neighbors for help. This is the core concept of an economic commons, a center that we fill ourselves together, and where we can ask people for help. Every community had at some point a form of commitment pooling -a quiet agreement that we will offer support and that we may pull from that support when needed. This was, and still is, the essence of insurance.

You ensure there is support when hard times happen through a commons with limited access.

Where I live, every village savings and loan association, every table-top bank, has an emergency fund. Now days in much of the world, providing insurance (just like providing loans) has become a regulated business (supposedly to protect people from harm). Where I live, everyone chips in when there is a death or an accident. It never ended - this idea that a community could offer each other insurance. What if local networks of insurance pools could connect across bioregions and support whole ecosystems?

So let’s pick apart everything insurance and put it into a polycentric, decentralized frame of commitment pooling …. networks that provide strength when needed. Let’s go through the rules together so that we understand the maths, the risks, and the rules. Let’s own this concept of insurance from every angle so when people ask us, “what is the risk?” we can answer clearly.

For people who focus on risk, the starting place is simple (and less simple) language (I’m going to go through a bunch of terms used in the insurance world and break them down - please google them to go deeper and discuss in the chat):

Risk is uncertainty that can hurt the commons. A peril is the cause of harm - fire, flood, illness - while a hazard is the condition that makes the peril more likely or more severe. The exposure is what sits in harm’s way and how much of it there is. We only insure what carries insurable interest (where the person or group would truly suffer loss). When a pool promises to make someone whole, it’s practicing indemnity: restoring the person toward where they were before the loss, not gifting windfalls.

Also note that when we think of an insurance pool, stagnation is not the idea - the pool being tested and circulating is important. Having a portion of a normal lending pool where a special certificate can be issued to allow people, in emergency, to access resources - this can happen in any pool.

Change the trigger, not the grammar: lending and insurance run on the same bones.

Just like a lending pool, to prevent strain on the pool, we set limits (maximums for how much can flow out in a single event and across a season) alongside deductibles or personal first-loss amounts. We may add waiting periods to avoid immediate draw before the facts are clear, and exclusions for harms the pool cannot sustain. These instruments aren’t there to be harsh; they are guardrails against moral hazard (people taking more risk once they’re protected) and adverse selection (only the riskiest people joining). A healthy pool uses these tools carefully, with transparency and consent.

For those familiar with commitment pooling, you know that stagnation is not the idea - the pool being tested and circulating is important. Having a portion of a normal lending pool where a temporarily increased borrowing limits or special certificate can be issued to allow people, in emergency, to access resources (swapping) - this can happen in any pool.

There are two broad ways insurance pools ‘pays out’ (release emergency certificates that give pool access). Indemnity models ask, “what did you actually lose?” and send assessors (trusted auditors) to measure it. Parametric models ask, “did a trigger happen?” and pay a pre-agreed amount when the trigger crosses a threshold - rainfall below X, wind above Y, a clinic or council attestation that a disaster has been declared. Parametric designs are fast and clear, but they carry basis risk: the chance the trigger fires when your hardship is small, or fails when your hardship is large. Community pools can blend both: a modest parametric stream to keep people afloat quickly, followed by a human review for deeper losses.

Behind the scenes, the math is not mystical. Expected loss is the product of frequency and severity of the issue being insured; the craft is to measure both honestly and keep uncertainty in view. (this can get complicated ….. ) In formal markets, underwriting sets conditions and rating converts risk into a premium using an exposure base (house value, hectares, revenue, member count).

In community pools, the math can be expressed as seeding and caps instead: how much the group commits in calm times, how much any person can draw in a crisis, how big the event-level and pool-level ceilings must be. Where data is thin, we lean on credibility - giving some weight to our own history and some weight to the wider region’s experience.

We watch the pool’s loss ratio and, if we’re formal, the combined ratio to see whether outflows plus operating effort are sustainable relative to inflows and reserves.
(In other words is your pool sustainable, are you loosing more than you are able to put back in over time?)

Because disasters cluster, a single village should not stand alone. This is where reinsurance logic appears in community language. A local pool can arrange a promise (overlapping pools) from a regional pool (a stop-loss commitment that absorbs losses above a threshold) or share a slice of risk in a quota share (regional common pool) with peers.

In polycentric networks - like all living systems, federation beats centralization: each pool keeps local judgment while agreeing on common attachments, limits, and reinstatement rules for severe seasons. The goal is not financial engineering; it is to keep the calabash from breaking again.

Claims are where trust is either built or burned. In commercial settings, FNOL opens a file and an adjuster investigates. In community settings, a steward committee or a designated clinic, school, or council can act as the attesting voice. Documentation need not be heavy, but decision logs should be public. If there is a dispute, low-cost mediation beats escalation. The tone matters as much as the math: a pool that treats members as counterparties invites friction; a pool that treats members as stewards invites reciprocity. When a third party harmed you, subrogation in community language simply means helping the pool recover from whoever is responsible so that the commons is made whole.

Because I get asked a lot about people who pull from the commons and can’t give back right away, here is the practical frame. In calm times, nobody draws from a potion of a pool (or a special insurance pool); they seed. When a verified emergency occurs, the pool stewards issue a special certificate (a time-bound, purpose-bound right that unlocks swap access to resources within explicit caps. The certificate can be triggered by a simple human attestation or a parametric data feed, or both.

Unused rights expire so liquidity returns. Modest fees on emergency swaps can flow into a shared reserve, and a touch of demurrage on idle balances can keep value circulating rather than pooling in corners. Stagnation is not the idea; a living pool breathes.

None of this removes the need to align with the regulated world. In many jurisdictions, selling promises to the public is insurance by law and requires a license. The community translation is to keep pools clearly member-based, purpose-bound, and transparent, and to name what they are not. Where licensed carriers are necessary (say, for liability from a bus or a clinic) community pools can still sit alongside, funding deductibles, meeting shortfalls, or buying a formal policy together. In those cases, members will meet words like occurrence and claims-made, retroactive date and extended reporting period; the translation is simple: “are we protected based on when the harm happened, or when we report it, and from when does our promise actually start?” The answer should be written in plain language and posted where everyone can see it.

If you are thinking in ecosystems, you should internalize a few more angles. Correlation is the quiet killer; when one farm floods, the others often flood. Spread risk across elevation, crop type, and livelihood. Aggregation is real; when a city grid fails, many lines of assistance trigger together. Hold honest buffers and rehearse disaster drills so that, when the threshold is crossed, the certificate process is muscle memory. Keep data governance humane: record what you must for accountability, protect what you can for dignity, and remember that identity is social before it is digital. And honor relational memory …. the record of who seeded, who showed up, who redeemed and repaid …. because in the long run, that ledger is your best anti-fraud control and your best underwriting model.

In this framing, insurance stops being a mysterious product and becomes a way a commons breathes under pressure. The broken calabash is repaired not by promises of endless capital but by rules that are clear, limits that are fair, triggers that are trusted, buffers that are sufficient, and a federation that stands behind the village when the season turns. When people ask, “what is the risk?” we can answer plainly: the perils we face, the hazards we can reduce, the exposures we choose to share, the caps we set to protect each other, the basis risk we accept with parametrics, the moral hazard we curb with participation and skin-in-the-game, the liquidity we keep circulating so that valuble help arrives on time, and the memory we keep so that trust compounds.

Insurance is nothing more and nothing less than a disciplined way to say:

We will face uncertainty together, we will write down the terms, and when the storm breaks, our common pool will open …. on purpose, within bounds, with care.