From Hurricane Irma to the Grindavík eruptions: volatility premiums in disaster governance

Abstract

Environmental volatility can inflate property values even as it destroys them. To show how, this article pairs a postcolonial micro‐state in the Caribbean (Sint Maarten after Hurricane Irma) with a Nordic welfare town (Grindavík in Iceland following volcanic eruptions) because they occupy the opposite ends of the governance capacity spectrum, while sharing certain similarities. Drawing on reports, media archives, 31 ethnographic interviews, and transaction data from 2015–25, it traces four mechanisms that convert danger into a ‘volatility premium’: distressed asset acquisition; symbolic risk branding; risk finance design; and distributive rules. In Sint Maarten, weak regulation permits private capital to aestheticise destruction and profit from speculative rebuilding, while in Grindavík, a universal state buy‐out socialises loss and freezes speculation. By combining disaster capitalism, speculative urbanism, and financialisation theory with market evidence, the study argues that turning risk into real estate value is political. The findings strengthen our understanding of climate risk economies and offer practitioners the means for auditing post‐crisis property policies.

1. INTRODUCTION

The world is witnessing a rise in extreme environmental events, and real estate markets are reconfiguring these disasters into value. Across hurricane‐prone archipelagos, volcanic zones, seismic fault lines, and flood‐threatened coastlines, properties situated within high‐risk landscapes are increasingly branded, bought, and sold at a premium. This phenomenon defies conventional economic logic, which would assume that exposure to destruction diminishes desirability. Why, then, do these disasters sometimes increase prices, instead of eroding them? In seeking to answer the question, what emerges is a pattern: the natural forces associated with risk and destruction are becoming scarcity drivers, and unspoken symbols of elite resilience. This article explores that inversion through the lens of paradoxical luxury and advances the notion of volatility premium: a speculative logic in which environmental risk is capitalised, transforming crisis into a real estate asset class.

The research design pairs a postcolonial micro‐state (Sint Maarten in the Caribbean after Hurricane Irma) with a Nordic welfare town (Grindavík in Iceland following volcanic eruptions) because they occupy the opposite ends of the governance capacity spectrum, while sharing certain similarities. These include: (i) physical disaster; (ii) tourism‐driven externally exposed economies; and (iii) recent major housing disruption. Their different regulatory capacity enables stronger inference about how governance regimes shape value conversion. By focusing on two such different cases, this study allows us to isolate how governance regimes mediate this conversion of destruction into value. The article draws on planning documents, media articles, interviews with residents (in Sint Maarten), and property price indices from both locations, and poses the following question: under what institutional conditions does a volatility premium emerge, and through which mechanisms is it realised?

The volatility premium refers to the differential value produced by proximity to environmental risk, where volatility itself becomes the basis for capital gain, symbolic distinction, or public compensation. Unlike traditional risk premiums, which reward investors for tolerating uncertainty, the volatility premium manifests when risk is actively instrumentalised, aestheticised, securitised, or absorbed to generate value. It differs from Klein's (2007) concept of disaster capitalism by not requiring elite conspiracy or neoliberal restructuring; it operates through routinised speculation and government logics. It differs from accumulation by dispossession (Harvey, 2003), which relies on wholesale expropriation. Unlike financialisation analyses (Aalbers, 2019; Birch and Muniesa, 2020) that treat property mainly as an income stream, the volatility premium highlights risk exposure as an active signal of future value. And this concept differs from symbolic capital (Baudrillard, 1981; Bourdieu, 1984) by grounding sign value in hyper‐responsive cycles of destruction and reconstruction.

Volatility becomes a value driver only when specific generative logics translate disaster into either branded revalorisation or publicly guaranteed liquidity. The next section shows how these logics diverge, and what that divergence implies for the political economy of climate risk.

2. METHODS

This study combines document and media analysis, ethnographic interviews, and property market data. For Sint Maarten, 24 planning/policy documents (see, for example, Government of Sint Maarten, 2018; VROMI, 2021a) and 36 press articles (see, for example, The Daily Herald, 2021; Kaori Media, 2025) were analysed. For Grindavík, 19 official documents (see, for example, Alþingi, 2024; Stjórnartíðindi, 2024) and 28 press sources (see, for example, Arnljótsdóttir, 2024; Gylfason, 2024) were reviewed.

In Sint Maarten, 31 semi‐structured in‐depth interviews were conducted between August and December 2023 with residents, developers, officials, policymakers, architects, and real estate professionals. The sample ranged from those on a low income to elites (aged 23–64; 18 women, 13 men) across the Dutch side of the island. All interviews were recorded with verbal consent, then transcribed, coded, and analysed for key themes. The interviews were anonymised for the reason of privacy. No interviews were conducted in Grindavík.

Property price indices (2025) were drawn from the Central Bank of Curaçao and Sint Maarten and Kadaster and Statistics Iceland, supplemented by Trading Economics.

3. DISASTER GOVERNANCE: STATE OF THE ART

3.1. Disaster capital and its limits

In the wake of crises, capital markets often identify opportunities. Klein's (2007) theory of disaster capitalism offers a foundational critique of how crises are exploited to advance neoliberal restructuring. She argues that disasters, wars, hurricanes, and economic meltdowns serve as strategic ruptures in which the elites dismantle public infrastructure and introduce privatised systems of profit‐making (Klein, 2007). From post‐invasion Iraq to post‐Hurricane Katrina (2005) New Orleans in the United States, Klein shows how the ‘disaster‐capitalism complex’ replaces public governance with private enterprise, using fear and disorientation to push through otherwise unacceptable reforms (Klein, 2007, p. 50). In this scheme of things, core functions (including, security, education, and even emergency response) are outsourced to private actors that profit from the void left by crumbling institutions. These shifts signal a transition from Keynesian rebuilding to speculative enclosure where crises function as ‘shock therapy’ for social re‐engineering (Klein, 2007, p. 49). From this perspective, disasters accelerate capital gain.

Klein's (2007) macro framework leaves the institutional mechanisms under‐specified; however, Adams (2013) and Schuller (2019) offer critical elaborations. Adams (2013) extends this critique through an ethnographic account of post‐Katrina New Orleans. She identifies the emergence of a ‘second disaster’ (Adams, 2013, p. 1), taking place through prolonged crises marked by bureaucratic inertia, subcontractor failure, and profit‐driven displacement. She demonstrates that federal programmes failed to deliver aid equitably, particularly in racially segregated areas. Instead, they create new economies of exclusion, moralising debt, and transforming public aid into a vehicle for private accumulation (Adams, 2013). Adams exposes how industries privatise aid through racialised vulnerability, replacing state responsibility with unaccountable subcontractor networks.

Schuller (2016, 2019), meanwhile, documents how disaster capitalism is played out through the non‐governmental organisation industrial complex and donor‐driven aid. His findings from the 2010 earthquake and the longer‐term humanitarian responses that followed, and Hurricane Matthew (2016) that impacted Haiti indicate that international humanitarian responses often bypass or undermine local networks and first responders, entrenching dependency and disempowerment. Schuller's research reveals how foreign interventions sidelined Haitian expertise, ignoring community capacities, and operated within a racialised disaster narrative, framing local populations as helpless. Both Adams (2013) and Schuller (2019) explain how disaster capitalism manifests as infrastructural exclusion, bureaucratic violence, and racialised governance.

Tierney (2006) frames disaster as an outcome of pre‐existing social, infrastructural, and institutional fragilities. She argues that catastrophes like Hurricane Katrina are the product of systemic neglect and politically constructed risk landscapes. Tierney demonstrates how inequality, disinvestment, and racialised urban development amplify the impact of disaster. For her, there is a distinction between routine disaster and true catastrophes, with the latter overwhelming institutional systems and exposing governance failures, such as of planning and preparedness (Tierney, 2006). Tierney shows that US preparedness plans often have amounted to what Clarke (1999) calls ‘fantasy documents’: symbolic texts that signal control but are divorced from practical capacity. Elliott, Loughran, and Brown (2023) take this further, showing how funded buy‐out programmes in Houston, Texas, reproduce neighbourhood stratification: homeowners from wealthy, white areas relocate, while those from less‐privileged, non‐white areas disperse individually, eroding community attachment.

Across these cases, scholars have observed how disaster routinely triggers distressed asset acquisition: the transfer of damaged or devalued properties under duress into the hands of actors with liquidity, from post‐Katrina New Orleans (Adams, 2013) to post‐earthquake Haiti (Schuller, 2019).

Taken together, these studies offer a layered conceptual framework: Klein alerts us to how capital seizes on disruption; Adams and Schuller trace how disaster capitalism is enacted through institutionalised neglect and humanitarian outsourcing; and Tierney shows how the architecture of vulnerability is embedded in state systems. These works are limited, though, by their focus on Anglo‐American and postcolonial contexts, shaped by fragmented governance. The capacity of strong, coordinated state systems begins to emerge as a theoretical lacuna.

3.2. Speculative urbanism and the financialisation of risk

Urban land markets are animated by what Smith (1979) termed the ‘rent gap’, between existing ground rent and potential ground rent that could be captured after reinvestment. When crises depress the exchange value, this gap widens, inviting what Harvey (2003) refers to as accumulation by dispossession: the strategic acquisition of devalued assets in anticipation of future profits. Goldman's (2011, p. 576) study of Bangalore, India, reframes twenty‐first century megaprojects as ‘speculative urbanism’, where city‐regions leverage real estate futures to engineer growth. Shatkin's (2017) comparative work across Asian metropolises confirms that state actors underwrite such projects by re‐regulating land markets and treating urban space as a liquid revenue stream.

The speculative turn is inseparable from the financialisation of property. Aalbers (2019) shows that since the 1990s, housing and land have been folded within global circuits of leverage, securitisation, and portfolio management, converting municipalities from regulators into asset markets. Birch and Muniesa's (2020) concept of assetisation captures the governing logic: things command value for their discounted future earnings, making rent streams calculable, tradable, and hedgeable. This is demonstrated in Fields and Uffer's (2016) paper, where private equity funds re‐engineer multi‐family rentals, creating high‐yield instruments, and accelerating landlord–tenant asymmetries in both New York City, US, and Berlin, Germany. In the Global South, subordinate financialisation channels Northern liquidity into mortgage and land markets, often under austerity regimes.

In essence, risk has become a speculative asset. Catastrophe bonds, insurance‐linked securities, and other reinsurance vehicles allow investors to trade on the probability of loss, externalising downsides as they harvest premiums (Froot, 2001). Keenan, Hill, and Gumber (2018) provide empirical evidence from Miami‐Dade County, Florida, that elevation already commands a market premium as buyers price in sea‐level rises. At the macro level, the Bank for International Settlements (2021, p. 8) notes that ‘strong risk appetite’ and abundant liquidity continue to inflate property valuations despite mounting climatic exposures. From this perspective, we see that volatility now functions as a value driver, attracting capital towards places and products that can monetise uncertainty through premiums, rents, or public guarantees.

These studies reveal a mechanism that indicates that: crises or policy shifts widen the rent gap; speculative urbanism mobilises state power to rezone, assemble land, and court investors; and financialisation packages those volatile futures into tangible assets. This results in an economy where riskier landscapes become investable, so long as government frameworks translate environmental or social hazards into calculable, tradable, and profitable exposures. Scholars of climate finance note that this logic extends to dedicated instruments such as catastrophe bonds, reinsurance vehicles, and securitised housing products, while illustrating how volatility itself is packaged and traded. These studies point to risk financing and transfer as a recurring mechanism by which environmental hazards are rendered investable (Froot, 2001; Cummins, 2008; Braun and Kousky, 2021).

3.3. Luxury as symbolic capital in risk zones

Real estate markets have long been understood as a form of symbolic capital. Veblen's (1899) concept of conspicuous consumptions suggests that the consumption patterns of the elite function primarily as the public display of wealth and social standing. According to his viewpoint, acquiring an extravagant property signals exemption from ‘ignoble labour’ (Veblen, 1899, p. 43) and cements the buyer's prestige hierarchy. In urban or high‐visibility contexts, the scale and ornamentation of a property becomes ‘evidence of wealth’ that emerging professional or social observers can easily read (Veblen, 1899, p. 19).

Bourdieu (1984) shows that culture and symbolic capital are inseparable from consumption practices. He argues that tastes and preferences emerge from a class‐specific ‘habitus’, a set of ingrained dispositions acquired over time. In the luxury housing market, this means that spending on a signature architect or a location in an exclusive enclave is a class signifier: economic capital converted into a built form, confirming and reproducing social distinction. Such properties carry ‘objectified cultural capital’ that is legible only to those already versed in elite codes of taste (Bourdieu, 1984, p. 105).

Baudrillard (1981) deepens this critique by suggesting that in postmodern consumer society, sign value supersedes use value. Real estate operates mainly as simulacra, circulating as images and narratives divorced from material reality. The idealised renderings, and lifestyle marketing associated with high‐end developments, often become more potent attractions to buyers than any structural solidity. In this hyperreal schema, a sea‐view mansion is coveted for the symbolic promise of an idyllic, exclusive lifestyle, outweighing, and even obscuring, any vulnerabilities associated with the property.

This study builds on paradoxical luxury (Björnsson, Rice, and Wolfgang Mixa, 2024), showing how properties remain valuable, despite their exposure to catastrophic risk, using Sint Maarten as the case sample. They subvert traditional notions of luxury (permanence, heritage or craftmanship), arguing that disasters, and the rebuild cycles that follow, have become part of luxury, conferring status through risk. The ability to absorb loss becomes a new form of conspicuous capital. Owners display their resilience by demonstrating that they can rebuild bigger and faster, turning vulnerability into social credentials.

When combined, Veblen, Bourdieu, and Baudrillard explain luxury as a system of wasted resources, class‐marked taste, and hyperreal signification. This article, however, reveals a critical gap: these frameworks assume that luxury's prestige depends on durability and exclusivity embedded in a stable context. Paradoxical luxury in risk zones underscores how ephemerality and regulatory arbitrage can sustain symbolic capital. This raises an equity issue: when an elite valorise ruin, they may displace vulnerable residents or divert public reconstruction funds, a dynamic revisited in the comparative analysis.

3.4. Governance and risk infrastructure

If speculative urbanism explains ‘why’ capital seeks volatile terrain, risk governance scholarships show ‘how’ institutions translate that volatility into either private windfalls or collective protection. Three interlocking domains anchor this dialogue: insurance; land use regulation; and social infrastructure.

Insurance architectures price risk and signal inevitability. Braun and Kousky (2021) trace the evolution of catastrophe bonds and other insurance‐linked securities, emerging in the 1990s following Hurricane Andrew (1992) and growing steadily since. These instruments allow insurers and sovereign governments to transfer catastrophe risk to capital markets through collateralised special‐purpose vehicles. Catastrophe bonds compensate investors with fixed and floating investment payments while exposing them to principal loss if a predefined trigger is encountered (Braun and Kousky, 2021). Early market data show issuance climbing from less than USD 1 billion in 1997 to almost USD 8 billion by mid‐2007, during which period the average speed of expected loss compressed from about 6.5 times to 2–3 times as investors became familiar with the product (Cummins, 2008).

When actual pricing deems sites uninsurable, states may pivot from risk sharing to risk withdrawal. Since 1989, the US Federal Emergency Management Agency has supported voluntary property acquisition in more than 1,100 counties across 49 states, purchasing in excess of 40,000 properties (Siders, 2019). These buy‐outs show how programme design at scale can shift property out of private markets and into public custodianship, with implications for equity and long‐term land use. A recent comparative analysis of land acquisition programmes in Italy, Japan, and the US (Otsuyama, Mashiko, and Tsukuda, 2024) reveals that early state purchase of high‐risk land, coupled with clear compensation schedules, prevents protracted displacement, and limits speculative land grabs during recovery.

Land use codes and social infrastructure modulate baseline vulnerability. Cutter, Burton, and Emrich (2010) show that US counties with stronger governance and institutional capacities, such as hazard mitigation planning, insurance coverage, and municipal service, score higher with respect to disaster resilience indicators and face lower relative vulnerability to loss. Yet, Klinenberg's (2002) classic ‘social autopsy’ reminds us that even well‐engineered plans collapse when civic networks erode. Cross‐national syntheses of post‐disaster housing programmes likewise find that states capable of coordinating housing, jobs, and social services shorten the reconstruction timeline and limit speculative displacement (Comerio, 2014).

Late‐modern states govern hazards through meta‐coordination: orchestrating insurance law, capital market rules, zoning ordinance, and retreat designations within risk regimes (Jessop, 2016). Whether a given regime privileges accumulation or solidarity determines who captures the volatility premium. Comparative housing studies further underscore the distributional dimension of these governance choices. Some programmes have entrenched inequality through selective resettlement and exclusion (Tierney, 2006; Elliott, Loughran, and Brown, 2023), while others have shortened reconstruction timelines and reduced displacement by providing broad‐base protection (Comerio, 2014; Siders, 2019). Such findings highlight distributional outcomes as a key mechanism through which governance structures convert disaster into either regressive or solidarity trajectories.

4. MECHANISMS OF VOLATILITY CONVERSION FROM A COMPARATIVE PERSPECTIVE

The focus on four mechanisms, distressed asset acquisition, aestheticisation and branding of risk, risk financing and transfer, and distributional outcomes, emerges from a comparative reading of the disaster governance literature. Each mechanism recurs across major disasters, although institutional context determines who captures the value of volatility.

Following Hurricane Katrina, Gotham (2012) shows how the privatisation of disaster recovery, through no‐bid contracts with multinational corporations and outsourcing by the City of New Orleans, shifted resources away from victims and enabled corporate profiteering, undermining accountability. Similar dynamics unfolded after the 2004 Indian Ocean tsunami in Aceh, Indonesia, where post‐disaster reconstruction reshaped land access and resettlement. While initiatives like joint land titling were presented as progressive reforms, the separation of tsunami‐ and conflict‐affected groups created exclusions and inequities and land rights and recovery priorities (Fan, 2013). After the 2011 Great East Japan Earthquake, Aldrich (2012, 2013) demonstrates that recovery outcomes varied widely, with communities possessing strong social capital recuperating faster, while weaker or rural communities faced slower rebuilding, raising equity concerns about who could effectively negotiate the process. These cases underscore a recurring pattern: environmental volatility depresses value for those without liquidity, while enabling acquisition by actors positioned to speculate on recovery.

Disaster also creates symbolic opportunities. In post‐Katrina New Orleans, waterfront redevelopments and tourism redevelopment projects were framed as authentic symbols of progress and renewal, even as many neighbourhoods remained in disrepair (Gotham, 2007). In New York City after Hurricane Sandy (2012), waterfront redevelopment was framed as a symbol of resilience and rebirth, even in flood‐exposed areas like Lower Manhattan and the Rockaways (Gotham and Greenberg, 2014). These examples parallel findings in Sint Maarten, where rebuilding in hazard‐prone zones can be reframed as luxury or resilience branding, converting risk into a cultural asset.

Across cases, financial infrastructure shapes how volatility is monetised. After Hurricane Andrew in 1992, catastrophe bonds and insurance‐linked securities emerged as tools to transfer hurricane risk to capital markets (Cummins, 2008; Braun and Kousky, 2021). Japan's earthquake and tsunami in 2011 produced another model, in which state‐backed land acquisition and relocation subsidies prioritised collective continuity of communities, effectively socialising risk instead of commodifying it (Otsuyama, Mashiko, and Tsukuda, 2024). Post‐Sandy, US federal flood insurance pay‐outs have channelled billions into rebuilding, although much of it was accrued by middle‐ and upper‐income homeowners, reinforcing spatial inequalities (Elliott, Loughran, and Brown, 2023). These cases indicate how risk financing mechanisms distribute volatility between private investors, insurers, and the state.

The equity consequences of post‐disaster housing are well documented. Tierney (2006) describes how Hurricane Katrina exposed deep racialised inequalities, with public housing residents facing displacement while wealthier areas were prioritised for protection. In Aceh, relocation sites often fractured community networks and favoured certain ethnic groups (Fan, 2013). In Japan, the post‐2011 buy‐out and relocation programmes stabilised many households but also generated uneven recovery between urban centres and rural peripheries (Aldrich, 2012). In New York City, Sandy buy‐out programmes enabled some neighbourhoods to retreat collectively, whereas others faced piecemeal relocation that eroded community attachment (Siders, 2019). Across contexts, distributive choices determine whether volatility deepens exclusion or enables solidarity.

These comparative studies demonstrate that the four mechanisms are not isolated to Sint Maarten or Grindavík, but reflect broader logic observed across diverse disaster regimes. Distressed acquisition, symbolic reframing, financial transfer, and distributional rules recur in hurricanes, tsunamis, and earthquakes; what differs is whether states or markets capture the volatility premium.

5. CASE STUDIES

5.1. Sint Maarten and Hurricane Irma

The Caribbean island of Sint Maarten, which has a tourism‐driven economy, had an estimated population of 40,000 in 2017 (STAT, 2017). Average disposable income was estimated at ANG 48,700 per person (EUR 24,850) while median monthly earnings were closer to ANG 1,500, ¹ with an estimated 60 per cent of the population in the rental market (STAT, 2017; World Bank, 2020). In September 2017, Hurricane Irma devastated Sint Maarten (Dutch side)/Saint Martin (French side), severely impacting more than 90 per cent of the island's infrastructure and properties, amounting to 2.5 times its gross domestic product in damage (CRED, 2018; Government of Sint Maarten, 2018). As a result, a significant portion of the population was displaced to shelters (International Organization for Migration, 2017), causing widespread distress in the property market.

The immediate aftermath of this category five event saw government efforts focused on emergency relief and securing reconstruction funds, which were provided by the Netherlands via a Recovery, Reconstruction, and Resilience Trust Fund managed by the World Bank (2020). Distressed homeowners, facing severe damage and economic uncertainty, often opted to sell property (Visit St. Maarten/St. Martin, 2020). Between 2016 and early 2020, more than 1,460 real estate transactions were recorded, with high activity in Lowlands (466 sales), Upper Prince's Quarter (286), and Cole Bay (280) (Central Bank Curaçao and Sint Maarten, 2025). The property price index (base = 100, January 2016) declined sharply after Irma, falling to the high seventies by late 2018, a decrease of more than 20 per cent, an indication of market uncertainty. Nevertheless, sale volume remained strong with on average 80–100 transactions per quarter (Central Bank Curaçao and Sint Maarten, 2025). Central Bank transaction micro data reveal that the post‐Irma surge was concentrated in two recognised luxury enclaves: Lowlands and Simpson Bay. Between the fourth quarter of 2017 and the first quarter of 2020, 79 per cent of Lowlands sales (1,224 versus 261 mortgages) and 40 per cent of Simpson Bay sales (242 versus 144) were completed without mortgage financing. This points to cash‐rich, often overseas buyers. In working‐class districts such as Lower Prince's Quarter, the opposite pattern held: 205 sales versus 283 mortgages. This shows how volumes stayed high even as the real property price index fell below 90. Distressed locals exited at discounted prices while speculative capital treated the dip as a buying opportunity, evidencing extreme price‐elastic demand at the top end of the market. These opportunistic buyers entered the market, moving quickly to acquire properties at bargain prices (SMI, 2019).

This rapid post‐disaster buying spree exemplifies what Klein (2007) famously called ‘disaster capitalism’, in which private actors exploit crises for outside gain. Sint Maarten's acceptance of foreign capital—for example, the island does not apply property taxes to non‐resident owners, a clear incentive for overseas buyers, but it does have transfer fees (RealEstateSXM.com, 2025)—made the condition for such buy‐ins favourable. Global investors anticipated that with the insurance pay‐outs and international aid (including the EUR 550 million Dutch recovery fund), the island would be rebuilt, which would facilitate a property value rebound.

One of the key patterns in the Irma reconstruction boom was the proliferation of high‐priced but substandard development. On the French side of the island, Mehdizadeh et al. (2023) document uneven and often inferior rebuilding, with many structures left vulnerable even five years after the hurricane. The rebuilding in Saint Martin was slowed by administrative reorganisation, financing bottlenecks, and public opposition to new zoning rules (Jouannic et al., 2020; Mehdizadeh et al., 2023). By contrast, Sint Maarten's National Recovery and Resilience Plan framed recovery as an urgent process requiring speed and simplified implementation (Government of Sint Maarten, 2018). Recovery on the Dutch side of the island, which was principally state‐led and backed by substantial financing from the Netherlands via the World Bank, enabled formal reconstruction projects to advance, even as more vulnerable groups, such as undocumented migrants, were excluded from many benefits (Collodi et al., 2021). These differences fuelled cross‐border tension about the pace and style of rebuilding.

One real estate agent noted that ‘a lot of the prices are inflated’ even though cadastral records lack data on construction quality, leaving appraisers to justify valuation based on irrelevant comparisons. A long‐time developer on the island described the ease of obtaining permits with ‘two pieces of paper’ and pointed out that many builders operated ‘not up to code’ owing to weak enforcement capacity. A government official who remained on Sint Maarten after Irma highlighted the ‘disastrous and detrimental response’ by local institutions. Prior to 2017, the island already had a stock of poorly constructed buildings (such as informal or speculative fabrications with lightweight zinc roofs), which contributed greatly to storm damage when high winds collided with flimsy materials, causing airborne debris (Abebe, Peña, and Vojinovic, 2018).

In theory, the disaster provided a ‘window of opportunity’ to build back at higher standards, but in practice much of the new construction remained sub‐par (UNISDR, 2017). Other projects that were co‐financed through the World Bank‐managed Trust Fund were required to meet updated draft Building Decree/Code BC0, which introduced higher wind‐load standards based on Eurocodes and required third‐party structural audits (VROMI, 2021a). Property developers often prioritise financial expediency over resilience: on the French side of the island, one post‐Irma assessment found that many of the new or repaired buildings, including luxury properties, were constructed under lax incentive programmes (Mehdizadeh et al., 2023). Developers converted exposure into symbolic capital (Bourdieu, 1984), banking on visual markers to signify exclusivity while externalising construction risk. This aligns with what is referred to as a ‘spectacular recovery’ narrative, which is the use of visual normalcy and staged resilience to mask deeper vulnerabilities (Tierney, 2006; Klein, 2007). Such projects exemplify the profit logic behind paradoxical luxury: the appeal to high returns‐led investors of accepting lower construction quality, since proper hurricane‐resistant building would ‘unnecessarily’ increase costs and eat into the margins (Mehdizadeh et al., 2023). This led to quickly built expensive villas, condominiums, and hotels that look high end on paper, but may not withstand the next storm, effectively transforming the risk to future owners and the public.

Sint Maarten's real estate market's weak regulatory framework proved ill‐equipped to guide sustainable recovery. Building codes and land use regulations on the island have historically been outdated and loosely enforced (Abebe, Peña, and Vojinovic, 2018). Even after Irma, officials struggled to impose better standards. Local government workers noted that the ‘island is too small… everyone is connected… so no one is willing to enforce the laws, because it comes down on someone they're connected to’. Permitting processes were often fast‐tracked or bypassed in the rush to rebuild, opening the door for unscrupulous contractors and construction crews to implement projects that technically did not follow the policies. An architect constructing on the island admitted: ‘If you work with me, you can only choose between three contractors […] you're going to be screwed’.

The government's capacity to oversee and enforce the regulations was limited, and the need to revive the tourism sector and restore tax revenues created a political incentive to favour speed over sustainability. As a result, ‘building back better’, the mantra of the United Nations and World Bank during their recovery phase, stayed more of a slogan than a reality. There has been little comprehensive planning: for instance, no strong new zoning regulations to keep critical development out of flood‐prone areas, no island‐wide upgrade of infrastructure to support the building load, and insufficient integration of climate adaption measures beyond the individual project scale (Government of Sint Maarten, 2018; VROMI, 2021b).

The post‐Irma landscape was defined by ad hoc, developer‐led initiatives. Significant development by private luxury ventures, such as the construction of twin 20‐storey residential towers, aimed to show that the island is ‘thriving’ again, in order to restore belief in Sint Maarten's property market (The Daily Herald, 2021; Kaori Media, 2025). The construction of high‐profile developments like the Mullet Bay Golf Course, located in low‐lying coastal areas, gained political support as a sign of confidence, but they also highlight the short‐termism of recovery. Five years on, the consequences of this approach are evident: resorts and condominiums were constructed and sold, while many working‐class neighbourhoods and public facilities lagged behind. On the French side of the island, meanwhile, a ‘large number’ of homes damaged by Irma remained unrepaired or abandoned in 2022, especially in neighbourhoods like Agrément (Mehdizadeh et al., 2023), raising safety concerns.

5.2. Grindavík and volcanic eruptions

The small Icelandic fishing town and tourism community of Grindavík had an estimated population of 3,400 in 2020, up 16 per cent on 2015 (City Population, 2025; Statistics Iceland, 2025b). Average disposable income was estimated at about ISK 4.2 million per person (EUR 27,000); median monthly earnings were closer to ISK 500,000, with an estimated 80 per cent of households owning their properties (Statistics Iceland, 2021, 2022). Following a 2017 price surge, the local property market was still drifting upwards in 2020, with real house prices rising roughly four per cent year on year (inflation‐adjusted) and a steady flow of new flats being built to meet demand (Global Property Guide, 2020; mbl.is, 2020). National price‐series data show that the value of housing in Iceland surged by about 70 per cent in nominal terms (45 per cent in real terms) between 2017 and 2022, and even with the Grindavík freeze, the house price index was up about nine per cent year on year in December 2024, reaching an all‐time high of 792 points in April 2025 (base 2000 = 100) (Statistics Iceland, 2025a; Trading Economics, 2025).

In late 2023, the town of Grindavík became the site of international news coverage after a sudden volcanic eruption. The Reykjanes Peninsula experienced thousands of earthquakes that year, causing magma buildup under the surface and a significant increase in seismic activity (Veðurstofa Íslands, 2023). On 10 November 2023, the authorities ordered a mass evacuation of the town. Within weeks, eruptive fissures opened up to the north of Grindavík; the Sundahnúka eruptions began on 18 December 2023, with lava fountains and flows visible from Reykjavík, situated 40 kilometres away. Emergency crews had hastily built eastern barriers in an effort to protect infrastructure, but these defences were breached: a lava flow destroyed three houses on the edge of Grindavík in 2024 (Ritstjórn, 2024a). In the same year, 74 houses were listed as destroyed owing to the impact of earthquakes, and there were 408 reports of property damage (Arnljótsdóttir, 2024). Subsequent eruptions, most recently in April 2025, continue to reshape the landscape.

Since the first volcano, Grindavík's real estate market has been frozen because of geological volatility, with its inhabitants potentially forced to sell up and relocate. The state of emergency in Grindavík echoes the 1973 Vestmannaeyjar (Heimaey) eruption, when approximately one‐third of the town's homes were destroyed by or buried under lava and ash, and sea water was pumped on to the flows in an attempt to divert them (Gagarín, n.d.; Williams, Jr. and Moore, 1983). The eruption prompted the establishment of the Natural Catastrophe Insurance scheme (Ísland.is, n.d.; Safnhús Vestmannaeyja, n.d.). Unlike Vestmannaeyjar, where much of the town was ultimately rebuilt, Grindavík has seen almost its entire housing stock transferred into state ownership under a buy‐out law, effectively freezing the market (Alþingi, 2024; Fasteignafélagið Þórkatla, 2026).

The Icelandic government's response was decisive. The buy‐out scheme was anchored in Act No. 16/2024 (law on property buy‐out in Grindavík), which entered into force on 1 March 2024, obligating the state to purchase the residential properties to shift volcanic risk exposure from households on to the public balance sheet (Alþingi, 2024). The operational details were set by Regulation No. 311/2024 (8 March 2024), restricting eligibility to properties registered as primary residence as of 10 November 2023, with a deadline for applications for this buy‐out of 31 December 2025 (Stjórnartíðindi, 2024).

The Ministry of Finance created a state‐owned special‐purpose real estate company to implement this scheme, ‘Fasteignafélagið Þórkatla ehf.’, which was mandated to buy, manage, and dispose of housing in Grindavík. As of May 2025, Þórkatla had received about 990 applications, approved roughly 90 per cent of them, and acquired the titles to more than 950 dwellings, at a cost estimated at ISK 61 billion (approximately EUR 423 million) (Gylfason, 2024; Sigurdardottir, 2024; Fasteignafélagið Þórkatla, 2025). The purchase price was calculated as 95 per cent of the official fire insurance value (brunabótamat) minus any outstanding mortgage debt; if debt exceeded value, the state absorbed the negative equity. In May 2025, Þórkatla introduced a pilot ‘friends‐of‐home agreement’ (Hollvinasamningur), allowing former owners limited use of their ex‐homes in summer while public ownership continues (Fasteignafélagið Þórkatla, 2025).

Parallel housing measures moved along swiftly. The government's social housing agency covered alternative housing for evacuees, paying initially 75 per cent (rising to 90 per cent) of the rental cost of temporary housing for up to three months (Ritstjórn, 2024b). Within weeks, the authorities introduced two housing associations (Bríet and Bjarg) to purchase up to 210 apartments in nearby towns for temporary relocation (Iceland Monitor, 2023; mbl.is, 2023). The nearby towns targeted by these firms were located in areas near Njarðvík (Reykjanesbær) and Hafnarfjörður, with priority leasing rights given to residents of Grindavík in the selected locations (Bjarg, 2023).

These measures demonstrate the government's approach to treating the housing market as a collective responsibility in the face of a disaster triggered by a natural hazard. The intervention preserved property values (via buy‐outs) and stabilised housing supply for the uprooted population. With the vast majority of the town's housing stock now consolidated under a single public owner, speculative resale activity has become structurally impossible.

In the short term, Grindavík's sudden evacuation created shockwaves in nearby real estate markets. The demand for homes and rentals around the Reykjanes Peninsula spiked overnight, leaving families to secure lodging before Christmas (Iceland Monitor, 2023). Local news outlets noted concerns about rent gouging and shortages, prompting the state to cap rents and the costs of subsidies for evacuees (Guðbrandsson and Harðarson, 2023; Logadóttir, 2024). The government aimed to counter the potential spike in housing prices due to the disaster by buying entire blocks of flats in neighbouring towns. In Grindavík, however, the abandoned properties became almost a new class of asset: the houses that remain intact are located in a high‐risk zone with an uncertain future. Private speculation was minimal; few buyers would gamble on property in an active volcanic area unless deeply discounted. If anything, a reverse speculation occurred: some residents reportedly wanted to sell immediately owing to the intensified earthquake activity, but the government cautioned against distress sales and then stepped in as the buyer of last resort. In agreeing to pay close to the pre‐disaster value, the state removed incentives for predatory investors to swoop in at discounted prices.

Media narratives around the volcanic incident have primarily focused on questions of value and justice. Headlines noted that one per cent of Iceland's population lost their homes overnight (Sigurdardottir, 2024). Political debates arose questioning how to assign value to properties whose long‐term safety could not be guaranteed, or which some feared might remain in a prolonged state of risk (Ólafsson et al., 2025). The government's buy‐out at 95 per cent of the insured value was generally praised as generous, although it raised questions, notably: should a house at the foot of an erupting volcano be treated as 95 per cent ‘whole’? Icelandic officials defended the plan as a solidarity measure to keep people afloat financially, allowing them to resettle elsewhere. The market outcome is that Grindavík's real estate has been monetised (via insurance and state funds), but not rebuilt, marking significant losses distributed across Icelandic society. Nearby towns like Njarðvík have absorbed the growth; their housing markets tightened but also saw significant boosts in government‐backed development and infrastructure to host the displaced. This case demonstrates a strong government‐led approach in which the volatility of nature prompted an equally dramatic intervention to stabilise housing needs.

6. DISCUSSION: WHO CAPTURES THE VALUE OF VOLATILITY?

The cases of Sint Maarten and Grindavík offer a strong comparative lens with which to observe how divergent governance regimes mediate the relationship between environmental volatility and real estate value. Sint Maarten, shaped by colonial fragmentation, institutional weakness, and heavy reliance on foreign capital, exemplifies a market‐led recovery where disaster becomes an entry point for speculative investment. Here, the weakened state enables private actors to exploit distress, using luxury branding to mask risk. By contrast, Grindavík reflects a technocratic, coordinated Nordic welfare model in which the government intervenes to absorb risk, consolidate assets, and stabilise the housing system through public ownership.

This contrast points to a key question: how do divergent governance regimes convert environmental volatility into real estate value? In both cases, disasters destroy and reorganise. The mechanisms of reorganisation differ sharply, though: one through speculative extraction, the other through public absorption risk redistribution. This discussion synthesises the findings through a four‐part typology: acquisition; symbolic framing; risk financing; and distribution. Each reveals how divergent governance logics determine who captures the volatility premium. These cases show how governance logics shape risk outcomes and decide who acquires volatility's value.

A potential objection to this framing is that the contrast between Sint Maarten and Grindavík reflects hazard difference rather than governance difference. Hurricanes invite rapid speculative rebuilding because the land remains habitable, whereas volcanic eruptions may necessitate state‐led withdrawal owing to the prolonged uninhabitability. The hazard asymmetry is real, but this does not by itself dictate the observed outcomes. Weak governance in Sint Maarten allowed speculative arbitrage that could, under stronger institutions, have been restrained. Iceland's buy‐out programme was not an inevitable consequence of volcanic risk: in a weaker regime, distressed households might have sold at discounts to opportunistic buyers. The cases demonstrate that hazard characteristics set constraints, but governance architectures determine whether volatility is captured privately or absorbed collectively.

Three event‐level differences shaped post‐disaster management options, and these are the pathways through which volatility is transmuted into value. The first is spatial footprint and territorial solidarity. Hurricane Irma produced island‐wide damage in Sint Maarten/Saint Martin and struck nearby islands in the same tourism circuit. This eliminated intra‐island receiving capacity and forced displaced households into short‐term regional accommodation. In this context, relief and reconstruction depended heavily on external finance and donor programmes, while housing supply was tight and fragmented. By contrast, the Reykjanes Peninsula eruptions primarily impacted a single town, Grindavík. Contiguous municipalities remained functional and could absorb evacuees. State actors then operationalised territorial solidarity through bulk rental support and acquisitions in neighbouring towns, and later, the consolidation of Grindavík housing stock under a public owner. These spatial conditions expanded the feasible set of coordinated public interventions (Bjarg íbúðafélag, n.d.; mbl.is, 2023; Fasteignafélagið Þórkatla, 2025).

The second factor relates to the temporal profile and administrative lead time. Irma was a short, catastrophic shock that destroyed a large part of the built environment within days, compressing decision windows for both households and officials and creating an urgent demand for liquidity. That timing advantaged buyers able to transact quickly before new standards or programmes could be designed and enforced. The Reykjanes sequence unfolded over months, in the form of earthquake swarms and repeated fissure openings between late 2023 and 2025. Authorities had weeks or months to draft and pass the buy‐out laws, set the compensation formula, establish the state property company, and define the policy trajectory before a secondary market could form (Veðurstofa Íslands, 2023; Alþingi, 2024; Uwera, 2024; Fasteignafélagið Þórkatla, 2026).

The third element is hazard expectation and preparedness memory. Sint Maarten's risk environment is defined by the certainty of recurring hurricanes but uncertainty about their timing and strength. Residents and markets know storms will return, but despite this, the institutional ability to translates this awareness into resilient codes, zoning, or insurance was weak. In contrast, Grindavík had been volcanically dormant for more than seven centuries, but seismic unrest on the Reykjanes Peninsula since 2019 signalled a new eruptive cycle (Parks et al., 2024). Iceland's seismic monitoring, in combination with institutional memory of the 1973 Vestmannaeyjar (Heimaey) eruption and the existence of the Natural Catastrophe Insurance scheme (Ísland.is, n.d.), allowed authorities to design the buy‐out and relocation pathways before fissures opened beneath the town. The two cases highlight the contrast between permanent hazard/weak institutionalisation and reactive hazard/strong institutionalisation.

These three event‐level differences define the boundary conditions within which government acts. A widespread footprint and compressed timeline narrow the administrative menu, but robust states still produce counter‐speculative tools: temporary transfer moratoria; emergency price gouging controls; acquisition funds; and standardised resilient‐rebuild programmes (Comerio, 2014; UNISDR, 2017; Siders, 2019). A localised footprint and longer lead time can be squandered if authorities refrain from pre‐committing to public acquisition. Hazard expectation also matters: where risk is permanent but weakly institutionalised, as in Sint Maarten, volatility becomes a recurring opening for speculative capture; where long‐dormant hazards are paired with constant monitoring and institutional memory, as in Iceland, volatility can be rapidly collectivised. The observed divergence is best understood as policy architecture interacting with hazard constraints: geometry, tempo, and expectation set the stage; and institutions decide whether volatility is privatised through distressed acquisition or collectivised through buy‐outs and asset freezing.

Sint Maarten's post‐Irma recovery shows how weak regulation facilitates the privatisation and aestheticisation of volatility. Transaction data show mortgage‐free speculative entry into luxury enclaves but distress exits from working‐class districts. This aligns with Klein's (2007) ‘shock doctrine’ and Harvey's (2003) logic of accumulation through dispossession. Developers inflated prices via branded recovery aesthetics, which lends weight to the definitions of paradoxical luxury (Björnsson, Rice, and Wolfgang Mixa, 2024), a form of symbolic capital grounded in risk. Insurance pay‐outs and donor funding subsidised speculative gains while reconstruction bypassed legal codes. Volatility was financialised via externalisation risk and valorised optics.

By contrast, the Icelandic response to the Reykjanes eruptions foregrounds a technocratic welfare model that pre‐emptively de‐commodified risk. The buy‐out via Act No. 16/2024 shielded households through state absorption of negative equity and halted private speculation. This diverges from disaster capitalism by removing the asset from market logics altogether, turning properties into publicly‐held, non‐exchangeable assets. In this case, state intervention functions as asset freezing to prevent capital extraction. The state monetised risk (through insurance) but blocked its reinvestment as capital.

These different pathways substantiate the core proposition: who captures the volatility premium, capital or state? The benefactor depends on the government's ability or willingness to narrate, regulate, and de‐marketise destruction.

Across both cases, we can identify four distinct mechanisms whereby environmental volatility is transformed into value, each driven by the respective underlying governance structure: distressed asset acquisition; aestheticisation and branding of risk; risk financing and transfer; and distributional outcomes. See Table 1.

TABLE 1.

Mechanisms of volatility conversion in Sint Maarten and Grindavík.

Mechanism	Sint Maarten (market‐led)	Grindavík (state‐led)	Implications
Distressed asset acquisition	* Seventy‐nine per cent of Lowlands sales and 40 per cent of Simpson Bay sales (2017–20) were mortgage‐free, indicating cash‐rich foreign buyers. * Transaction volumes remain stable despite a more than 10 per cent price drop, signalling speculative entry.	* Act No. 16/2024 mandated the state's purchase of more than 950 dwellings at 95 per cent of the fire insurance value. * Þórkatla consolidated approximately 90 per cent of the housing stock. * Negative equity was absorbed by the Treasury.	Demonstrates how governance capacity mediates value capture: regulatory fragmentation enables arbitrage; public consolidation prevents it.
Aestheticisation and branding of risk	* ‘Rebuild with us’ marketing enabled substandard, hurricane‐prone construction as luxury recovery. * Developers exploited lax regulation and valuation inflation.	* Government framed interventions as ‘collective safety’. * Disaster transparency replaced marketing. * No resale or branding possible.	Shows how symbolic capital attaches to risk only under private regimes. State freezing disables luxury branding narratives.
Risk financing and transfer	* Absence of property tax plus the expectation of EUR 550 million recovery fund subsidises speculative gain. * Insurance pay‐outs are captured by private actors; costs are externalised.	* Buy‐out funded via sovereign debt. * Risk monetised through fire insurance valuation, not commodified. * ‘Friends‐of‐home’ leases restrict resales.	Contrast speculative financialisation with state‐led asset freezing, a form of non‐performative assetisation (Birch and Muniesa, 2020).
Distributional outcomes	* Mortgage‐backed sales concentrated in working‐class zones (such as Lower Prince's Quarter). * Many exited under distress; more than 1,200 homes unrepaired in 2022.	* One per cent of Iceland's population displaced but compensated near‐par. * Rent caps and emergencyhousing mitigated ripple effects.	Identical shocks produce regressive or progressive redistribution depending on whether the regime lends weight to disaster capitalism and welfare state theory.

Source: author.

Each of the four mechanisms outlined above maps onto established theoretical debates, as follows. First, acquisition of distressed assets parallels Harvey's (2003) and Klein's (2007) insights into how crises create windows for capital accumulation. Second, aestheticisation and branding reflects Veblen's (1899), Baudrillard's (1981), and Bourdieu's (1984) theories of symbolic capital, previously theorised as ‘paradoxical luxury’ (Björnsson, Rice, and Wolfgang Mixa, 2024), but only in a market‐led context. Third, market versus socialised speculations connect to Aalbers' (2019) and Birch and Muniesa's (2020) work on financialisation, contrasting speculative real estate circuits with state‐led assetisation models. Fourth, distributional outcomes align with Tierney's (2006) and Elliott, Loughran, and Brown's (2023) finding that post‐disaster housing programmes can either entrench inequality or mitigate it, depending on governance capacity and social infrastructure.

Across both cases, environmental volatility becomes a convertible resource. Disaster opens up a terrain of opportunity, but the mechanisms through which value is extracted or redistributed are fundamentally shaped by governance regimes. In Sint Maarten, volatility is absorbed by private capital; in Grindavík, it is done by the state. This structural difference reveals how institutional capacity, political intent, and socio‐historical context determine who captures value when crisis strikes.

In Sint Maarten, postcolonial fragmentation and regulatory weakness allowed speculative investors to absorb volatility through acquisition and branding. Private capital treated the hurricane as an entry point, turning destruction into arbitrage: buying low, rebuilding fast, and selling under the guise of luxury recovery. Here, volatility was privatised and financialised: value was extracted through risk externalisation and symbolic inflation.

In Grindavík, the Icelandic state enacted a pre‐emptive, technocratic model of risk absorption. Volatility was collectivised and held in public custody. The state prevented private speculation: it froze the housing market, stabilised households through relocation, and monetised disaster through insurance‐based compensation without returning the assets to the market. Here, the value was distributed and contained.

Both examples demonstrate how volatility is operationalised. Whether through capital‐ or state‐led absorption, environmental risk is mediated by political choices. The question becomes: who benefits and how is this legitimised?

7. CONCLUSION

The study set out to explain why, and under what conditions, environmental volatility is converted into a source of real estate value, instead of liability. By comparing post‐Irma Sint Maarten with post‐eruption Grindavík, it demonstrates how the ‘volatility premium’ is a political, economic artefact that materialises only when specific governance mechanisms translate physical risk into legally recognised, exchangeable assets. In the fragmented regulatory setting of Sint Maarten, the disaster opened a space for speculative acquisition, luxury branding that aestheticised exposure, and privately captured insurance windfalls. In the technocratic welfare state of Iceland, the government pre‐empted speculation through a near‐universal buy‐out, which socialised negative equity, and effectively froze the local housing market. These different trajectories highlight that the outcomes predicted by classic theories of disaster capitalism, speculative urbanism, and financialisation are contingent on the capacity and intent of the state: where regulation is weak, volatility is privatised and financialised; where the state is strong and supports solidarity, volatility is collectivised and contained.

This comparison indicates that while hurricanes and volcanic eruptions differ in probability, duration, and consequences for future habitability, these hazard features only set the stage. The decisive factor is how governance structures respond: they can channel a hurricane into speculative recovery or convert a volcanic eruption into collective compensation. Hazards create disruption, but governance determines whether it becomes a volatility premium or a socialised liability.

In sum, this article makes three contributions to the debate. First, it refines the concept of disaster capitalism by specifying the micro mechanisms of distressed asset acquisition, symbolic branding of risk, and design of risk transfer instruments through which venture capital or the state can capture the gains from destruction. Second, it extends cultural economy debates by documenting ‘paradoxical luxury’, a form of symbolic capital that celebrates the ability to rebuild quickly and conspicuously in volatile zones, but only under market‐led regimes, leaving narrative spaces for such performances. Third, it links these insights to welfare state theory, demonstrating that the option to monetise or socialise volatility is itself a function of fiscal capacity, institutional coherence, and political choice.

Various limitations temper these findings. The research relies on two island cases and a 10‐year traction window: longer time‐series data will reveal whether the Icelandic asset freeze endures or whether speculative pressure resurfaces once the buy‐out moratorium lapses. The ethnographic evidence is rich for Sint Maarten, but thinner for Grindavík, where rapid evacuation restricted fieldwork; future studies could incorporate resident narratives as they resettle. Both cases involve small, tourism‐heavy economies, which limits the generalisability of the volatility premium concept to larger metropolitan contexts where insurance markets, credit systems, and planning regimes are inherently different.

These constraints present opportunities for future studies. Cross‐national panel analyses could test whether the volatility premium appears in deltaic megacities, seismic high‐rises, or wildfire suburbs, and under which conditions of insurance law, land acquisition rules, and fiscal capacity it is most pronounced.

The question of who reaps the financial benefits or bears the monetary consequences remains. This article argues that the answer lies in the architecture of governance. Volatility can be harnessed as a private windfall or absorbed as a collective duty; steering it towards the latter will require that states act before speculative capital does.

CONFLICT OF INTEREST STATEMENT

None.

Björnsson, T. (2026). From Hurricane Irma to the Grindavík eruptions: volatility premiums in disaster governance. Disasters, 50(2), e70046. 10.1111/disa.70046

DATA AVAILABILITY STATEMENT

Research data are not shared.