Catastrophe bonds versus Social Policy Bonds

Catastrophe bonds are typically issued by insurers. The investors who buy them are paid a high rate of interest. If a defined catastrophe (eg a hurricane or pandemic) does not occur, then the investors will make a healthy return on their bond purchase. But if the catastrophe does occur, then the principal initially paid by the investors is forgiven, and is instead used by the insurer to pay its claims to policyholders. (Source) Cat bonds can be quite profitable to investors.

They bear some similarity to Social Policy Bonds. A government could issue Social Policy Bonds that would reward people if, say, a disastrous hurricane did not occur. Holders of the bonds would then be in a similar position to holders of catastrophe bonds: they win if there is no catastrophe. However, Social Policy Bonds would be defined differently. Their objective is to encourage people to do what they can to prevent the catastrophe occurring. So rather than target forces of nature like hurricanes, they might target the numbers of people killed or made homeless by such an event. Unlike holders of cat bonds, investors in Social Policy Bonds would have incentives to reduce the probability and scale of the defined risk.

All is not lost - yet - in Kenya, but the news is grim:

A month after its disputed presidential election, Kenya remains deeply divided and unstable. Politically motivated killings, hackings and gang rapes continue in the towns and in volatile country districts. The economy is faltering. ....What has happened is not a genocide, nor is Kenya anywhere close to being a failed state. But the killings and clearances have been grisly and wretched. When the dead rotting in the maize fields or pulled apart in the wilds by hyenas are eventually counted, over 1,000 Kenyans are likely to have been killed since the election. More than 250,000 have been displaced. The Economist (subscription)

The question that leaps to mind is: why isn't anyone with financial clout interested in insuring against or preventing this sort of catastrophe? The answer's just as clear: there aren't any significant financial investments at stake, as there are when a hurricane strikes the shoreline of a rich country. But that's where the people (or institutions) who could issue Social Policy Bonds come in: they wouldn't know how to avoid a catastrophe like Kenya, but they put up the funds that would motivate investors to do whatever they can to avoid one. The catastrophe bond concept works in practice. So too could Social Policy Bonds, and the potential beneficiaries could include the world's poorest, most vulnerable populations.