Insurers retreat from the coasts

Make Me Smart July 12, 2023

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Kai Ryssdal 

Who’s in charge? Just get the show on the road.

Kimberly Adams

Apparently you.

Kai Ryssdal

Oh my goodness.

Kimberly Adams

Hello. I’m Kimberly Adams. Welcome back to make me smart where we make today make sense. It is July 12.

Kai Ryssdal 

Hey, everybody, I’m Kai Ryssdal. Thanks for joining us on this what is today? Wednesday. We’re gonna do some news and some smiles. And then we’ll get out of your hair. So let’s do some news.

Kimberly Adams 

Yes, I mean, mine’s a quick hit. But it’s just like another marker of where we are in regards to climate change. I used to have all these conversations with Molly Wood, about how, you know, people were never going to stop living in the places that are going to be the most affected by climate change. But they were going to be forced out by insurance companies. And sure enough, yet another insurer this time, State Farm, has pulled out of Florida, because they’re like we cannot deal with the catastrophic, you know, costs of continuing to rebuild and rebuild and rebuild after hurricanes and other things. Now, obviously, other people in Florida including said Governor Ron DeSantis, are blaming other things for that, rather than just the cost. Because Florida’s legislature and the governor actually just passed some new regulations and put aside a fund, trying to keep insurance companies there. I think it was something like, I’m not sure if it was 3 billion or 3 million dollars, it was a whole lot of money, basically, to try to stop them from leaving. But it just was not a good financial decision for state farms. And you know, we want to let private enterprise do what private enterprise is going to do. It made no sense for them to stay, and there are fewer and fewer insurers in Florida, there are fewer and fewer insurers in California. And I think that this is going to be the thing that makes people actually retreat from the coasts is the uninsured ability of homes, and the high cost of rebuilding.

Kai Ryssdal 

Yes, but, so similar things are happening here in California because of the wildfire risk, right. A major insurance company not too long ago pulled out. But let me let me offer you the the earthquake parallel. We’ve been having earthquakes in California for as long as there has been a California, longer obviously, you know, tectonic time, but right, people still come to California, they still move to California, and we live in a very active earthquake zone. And so what the state has done, because private insurance is so prohibitively expensive, the state has set up the California Earthquake Authority. I’ll say that again. So the California Earthquake Authority, and the state now runs an insurance pool for earthquake insurance in the state of California. I buy my earthquake insurance from them, I’m sure many homeowners do because private market is so expensive, and my guess will be that because, you know, you’re gonna let private companies do what private companies are going to do. You can’t for- well, I suppose you could, but it wouldn’t go over well. You can’t force a company to sell insurance in a given state. But companies need state people, right? They need people to work, they need people to spend right. And so they will come up with I would bet in Florida and they will do it again in California to a California Earthquake Authority parallel to provide an insurance pool for homeowners. I’ll betcha betcha dime to a dollar that’ll happen.

Kimberly Adams

But they kind of already have that, they have a lender of last resort. But you don’t have devastating earthquakes every single year. In California. That’s true. Right. And in Florida, especially given the you know, the storms getting worse because of climate change. They’re having these like, knock out terrible serious damage storms almost every year.

Kai Ryssdal 

And we’re having we’re having wildfires same way. That’s true. Carlos real the parallel is right.

Kimberly Adams

Yeah. Wildfires. I think the parallel is probably more than

Kai Ryssdal 

More than earthquake. You’re right. So yeah, so we’ll have the California wildfire authority and Florida with California hurricane authority or the Florida hurricane authority, right? Yeah, that’s what’s gonna happen.

Kimberly Adams 

Yeah. Yeah. Okay, so people are gonna still live ther. I mean, I will point everyone to Amy Scott’s most recent season of How We Survive, where she actually talks about people living in Florida in Miami in particular, as the city is sinking. But you know.

Kai Ryssdal 

It was a good series. It was amazing. Yeah for sure.

Kimberly Adams

People are gonna do what people are gonna do. Okay, what’s your news?

Kai Ryssdal

Okay, I’ve got two, one is is the actual news item I want to raise. And then the other one is just a point of privilege with the good headline writers at Bloomberg. So the first thing I want to point out is the story in Bloomberg actually, about Russian crude oil prices for the first time since the restrictions and sanctions after the invasion, and the price caps that the West arranged to have put on Russian oil. And the way, the mechanism they did that was, they would not allow any insured carriers to carry Russian oil, thus depressing the price and capping the price at $60 a Ural that’s the, Ural is the is the nomenclature for Russian oil, right $60 now,

Kimberly Adams

I didn’t know that, you learn something new everyday.

Kai Ryssdal

Just recently, yes, just recently, the Ural has broken $60 On the way up, it has broken the price cap. So somehow, some way uninsured oil is being transported, right? Think about this for a minute oil on tankers that could not be insured, because they are evading Western sanctions is being transported mostly to China, probably also to India, some other companies. But here’s why that matters. All this oil floating around out there on uninsured carriers. So when there’s an environmental disaster, insurance companies step in, and they pay a lot of the cleanup bills, when you have uninsured tankers carrying, I don’t know,100,000 gallons or whatever it is of oil, and it runs aground or something. That’s a very expensive mess. And if they’re not insured, it’s very expensive, expensive mess. And so

Kimberly Adams

You know they’re not going to pay it, you know.

Kai Ryssdal 

Of course not. Of course not.

Kimberly Adams

Publicize the cost and privatize the profit.

Kai Ryssdal 

It’s it’s a shadow fleet of tankers, Bloomberg points out and I think that’s it’s something that I’m, I promise you, actually the people in the United States government who were responsible for sanctions are paying attention. For sure. Yeah. So here’s my other one. And it’s just it’s a quick thing on on inflation. And the number that came out today, which, for those of you who have not been besieged with it all day, as you observe the news, inflation year on year now is running at 3%, which is a third sorry, it’s it’s, last year at this time, it was 9%. Now it’s 3%. So it is in fact, a third of what it was a year ago. Which is great, and it’s all good. But it is still 50% More than the Fed wants it to be the Fed wants inflation at 2%. It is 3%. one percentage point and that math is a full 50% higher, right. So it’s the Fed has the toughest part of this to go. And I just want to point out that if you read Bloomberg, and you read the story today that says inflation to 3% flags, the end of emergency, it’s a turning point for the Fed. That is not true. That is simply not true. The Fed is going to keep on raising rates at least once, maybe twice. So let’s not think the rate hiking cycle is over. Just it bugged me when I saw it today. And

Kimberly Adams

Why did they think that though?

Kai Ryssdal 

I don’t know. I don’t know. I don’t know. I mean, this is the hard part. Right. I’m gonna I’m going to quote Raphael Bostic, the head of the Atlanta Fed on Marketplace six weeks ago, this is now the hard part because inflation is absolutely coming down. It’s still more than the Fed wants it to be. So the Fed’s gonna keep raising rates, but people are going to be screaming and saying, wait a minute, stop. First of all, higher rates are really painful. But also let’s keep an eye on the unemployment rate. And if unemployment starts ticking up, then it’s gonna get really hard for the Fed. Really hard. So, anyway, that’s my news. Oh,

Kimberly Adams 

Okay. I’m so curious what, why they think that I need to go back and read it a little more carefully. All right, Jayk. Um, yeah.

Kai Ryssdal 

All right, you got three in there. What’s up with this?

Kimberly Adams 

Got? Well, it’s two smiles, but they’re like two or two things for one of them. But so I saw the cutest story in the Washington Post today. It’s adorable. And it made me so happy it made me smile. So there’s a drycleaners called Best Cleaners in Middletown, Connecticut. And in the summer, it gets hot. And so they would like leave the doors open to their dry cleaners and let the breeze flow through the like the front and the back. And they started noticing turtles were coming in to their to their dry cleaners, because there was a pond on the other side of this road in front of the dry cleaners, where the turtles needed to like migrate because I guess turtles have like built-in GPS, and they were trying to get to this pond, but they crossed it the other way in order to mate in some other place. So the dry cleaners now like let the turtles go through their dry cleaner every year and watch out for them. And then because it’s such a busy road and they’re worried about the turtles getting crushed, they like carry the little baby turtles over the road into the where the embankment is for the pond so that the turtles can live. And it’s very cute. And they’re talking about how they have to be careful not to step on the baby turtles this time of year, but like adorbs, right.

Kai Ryssdal

Totally. Totally, totally.

Kimberly Adams

Okay. So that’s, that’s number one. Also in cute animal news. I saw this on Tik Tok, there’s this woman on Tik Tok called, appropriately, the good news girl, and she posts positive news. And there’s this baby seal like it’s not baby anymore. It’s a little seal in San Diego, that has decided to start riding people’s surfboards. And just like I said, it just hops up there and rides along. And, you know, the surfers were worried that the seal might be in distress. And so they call the animal welfare people they said it was fine. It’s just curious and healthy. But you can’t like touch them because they’re protected. And so now all the surfers just like let the seal ride along. And there’s so many cute videos of the seal just like chilling on surfboards. And that made me smile too. Yeah, that’s what I got.

Kai Ryssdal 

It’s a bit kleptomaniacal that seal. So I’ve got two, one’s a quickie.

Kimberly Adams

Wait does he steal things?

Kai Ryssdal

Well yeah, he kinda takes the the boards and kind of rides them and goes away with them. Yeah.

Kimberly Adams

Oh, I didn’t know that he took the boards. I thought he wrote the boards with the some people

Kai Ryssdal 

No he kind of take. He kind of takes them. You know so it’s a good news… mmmm. So we gave a lot of time on this podcast a year ago to the James Webb Space Telescope, the one that was going way out there with really convoluted physics and all kinds of cool astronomical stuff. Anyway, today is three years, sorry, 365 days, one year, since its first images came back. And NASA has released a whole new set of images. And they’re cool, and you should check them out well, but on the show page. It’s, these photos are amazing. And science is cool. So that’s my quick I real make me smile. Alright, go ahead. You should know you should check them out. Go ahead, you’re so what?

Kimberly Adams

I have and I meant to use this as a smile a bit ago when I saw the Saturn photo, which is also in this article that you shared. And the way that the rings look is just wow.

Kai Ryssdal 

Yeah, they’re cool. It’s really cool. And it’s amazing that we can do this, you know, just like humanity. So my somewhat geekier smile is this the Beige Book came out today it’s the Feds eight times a year look at the regional United States economy broken down by Federal Reserve Bank districts. This item from the Philadelphia Federal Reserve caught my eye, despite the slowing recovery and tourism in the region. Overall, the Philadelphia Fed writes one contacted, “one contact highlighted that May was the strongest month for hotel revenue in Philadelphia since the onset of the pandemic, in large part due to an influx of guests for the Taylor Swift concerts in the city.” The woman is an economy unto herself. It’s amazeballs. Truly.

Kimberly Adams

I can imagine like a city that is like worried about economic decline, just luring Beyonce or Taylor Swift like, “do a concert here boost the economy.” Call it, ;ike pop star stimulus.

Kai Ryssdal

That’s amazing. It’s great. It’s great.

Kimberly Adams

That is funny there and also yes very nerdy.

Kai Ryssdal 

My life yeah.

Kimberly Adams

Live it, love it. That’s it for us today. We will be back tomorrow so please keep sending us your smiles and your comments and your questions. We’re at 508-U-B-SMART or you can write us at makemesmart@marketplace.org.

Kai Ryssdal 

Make me smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Today’s program is engineered by Jayk Cherry. Our intern is Niloufar Shabandi.

Kimberly Adams

Ben Tolliday and Daniel Ramirez composed our theme music. Our senior producer is Marisa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital. And on demand.

Kai Ryssdal 

Very nicely done. Very nice. More power to you.

Kimberly Adams

Oh boy.