Earlier this month, Keys and Mulder released a new NBER working paper that builds a new property insurance data set and then seeks to project where premiums are likely to increase over time due to catastrophic claims risk. Catastrophic claims are routinely insured via reinsurance. For property damage, the major risk is storm and natural disasters risk. It is mostly fire and hurricane risk.
Reinsurance has gotten expensive:
And these reinsurance costs are not uniformly spread out. Michigan is not facing substantial new hurricane risk.
Actuaries, with long and varied lags, rule the world. When actuaries get scared, premiums spike and right now actuaries are terrified of climate risk.
And apropos of nothing, this update from the National Hurricane Center came in just after I got back from the gym with my 11 year old:
…RECONNAISSANCE AIRCRAFT FIND BERYL NOW AN EXTREMELY DANGEROUS
CATEGORY 4 HURRICANE…
…LIFE-THREATENING WINDS AND STORM SURGE EXPECTED IN THE WINDWARD
ISLANDS BEGINNING EARLY MONDAY MORNING…NOAA and Air Force Reserve hurricane hunter aircraft data indicate
that Beryl has strengthened to an extremely dangerous category 4
hurricane. The maximum sustained winds are estimated to be 130 mph
(215 km/h) with higher gusts.SUMMARY OF 1135 AM AST…1535 UTC…INFORMATION
Tropical weather Reddit is having kittens as this is the earliest Category 4 in the Atlantic and far further east than a storm of this magnitude “should” be. They’re looking at Beryl and saying it looks like an August or September storm rather than a June storm.
The actuarial fear is motivated by storms like these.
Baud
We’ve come a long way since Inhofe here up a snowball on the Senate floor.
pluky
When recent experience leads one to seriously doubt the credibility of the history upon which one’s rate tables are based, reprice with extra margin for adverse contingency, and reduce exposure in high risk sectors! Yes, before I retired I was an actuary.
ronno2018
I keep waiting to see Florida real estate prices to decline but I think a lot of people there are older short termers and don’t care or don’t have a legacy they want to leave their kids.
Steve in the ATL
BTW, does anyone know there the phrase “having kittens” came from? My wife says that, and until a coyolpe of years ago I’d never heard it anywhere else.
way2blue
Homeowners’ insurance is being cancelled right & left in my Northern California town due to fear of wildfires—triggered by the payouts following the 2018 Camp Creek/Paradise Fire. I *think* there are a diminishing few insurance companies willing to take on the risk. And only if you have a fireproof roof and a vegetation-free perimeter around the house. Lots of brush clearing along the main roads through town…
TBone
Thankfully, yesterday’s NWS Emergency Broadcast tornado warning was a narrow miss here. It would have been tornado #2 at casa TBone.
like a metaphor
Has anyone seen forecasting of where Beryl is likely to go once it enters the Gulf of Mexico? I can’t find anything. Maybe it’s just too early to tell?
Lapassionara
I remember Hurricane Betsy well. It was a category 4 storm, IIRC, and it landed in August of 1965, maybe around August 20.
so, now we have the second named storm of the season, and it is the end of June. No wonder actuaries are paying attention.
TBone
Is it too much to ask that a hurricane washes away Mar A Lardass? Instead of Galveston or Nawlins?
TBone
@Baud: 😡😆 I have a photo of that in my meme stash.
Kelly
Last year a friend of mine attempted to buy a cabin in pine woods on the eastern side of the Oregon Cascades. Backed up to miles of US Forest Service land. A few years ago this was a high demand property. The deal fell through because he could not find insurance. Too far from a fire station. What’s worse when the seller contacted his insurance company to see if they would cover my friend they told him they would not renew the existing insurance.
Lobo
@Kelly: This! In colorado mountain homes are slowly becoming a negative, property insurance, HOA fees and rising(4x in some cases) to no insurance.
evodevo
@like a metaphor:
Yucatan was the last track I saw. Of course, it can change and head toward TX and LA…
Xenos
Lloyds is marketing Florida reinsurance risk in smaller ($25-50 Million) tranches to PE firms, hedge funds, and the like. Awfully profitable stuff if you accept risk for a year without major losses.
The big reinsurers (Swiss RE, for example) are out of the market for the time being.
kalakal
@Steve in the ATL:
It’s pretty common slang in the UK, I first heard from my grandmother so it goes back to at least 1900.
I heard somewhere it was originally medieval and related to pregnancy, as in “it feels like something is clawing inside me” but I’ve never seen that proven
Betty
Located just north of Beryl’s path, but expecting some effects as it is a large storm. It is early and as the season progresses, the storms will move north putting us in the crosshairs. We survived Hurricane Maria and are presumably now more resilient. Looks like that will be tested in the days ahead. Worried indeed.
kalakal
@like a metaphor: The current tracks show it going over Yucatan and then either into Mexico or north to Tx
next update from the modelling runs should be around 2pm est
kalakal
@Betty: I’m also concerned that there looks to be something nasty brewing in the wake of Beryl. about 3 or 4 days further away. We could very well have 2 major hurricanes in quick succession, like Irma and Maria
like a metaphor
@kalakal: @evodevo thank you
WaterGirl
@Steve in the ATL: I grew up with the phrase “don’t have a cow”. I assume it’s similar, just with kittens?
lowtechcyclist
@Steve in the ATL:
My WAG is that it evolved from “having conniptions.”
kalakal
@WaterGirl: “Having kittens” means to get really anxious or nervous about something, I don’t know the ‘have a cow’ one, is it the same?
Anoniminous
@pluky:
The entire FIRE complex is re-evaluating their risk exposure. Lending institutions are quietly pulling back from Florida for example
Anoniminous
@like a metaphor:
WAY too early to tell.
trollhattan
Be that as it may, you must never, ever take away consumer choice* even if it means walking into the climate woodchipper much sooner.
* “Choice” being dictated by us, predicated on earning the highest possible margins in this and the coming quarters.
trollhattan
@WaterGirl:
“Birthing kittens” and “don’t have a cow, man” are how I learned them, in that order. The second of course being one Bart Simpson.
WaterGirl
@lowtechcyclist: hahaha. I laughed out loud. I wonder if that might be it. Too funny.
Harrison Wesley
Even without a hurricane, there’s been some serious flooding in South and SW Florida. We had a rainstorm a few weeks ago that I heard (don’t know for sure) dumped more water around here in 2 days than Hurrican Ian did the entire time it was overhead. Interesting times.
EmbraceYourInnerCrone
@like a metaphor: Hurricane Beryl National Hurricane Center. NOAA
kalakal
Can’t get this to work, please ignore
WaterGirl
@kalakal: Studiously ignoring. Something? :-)
like a metaphor
@EmbraceYourInnerCrone: I did look at that site, but it only shows the cone as far up as Yucutan peninsula. I know it’s early, but if I need to evacuate Houston, I will need lots of advanced warning, due to a house full of cats and elderly parents.
When the waters of Harvey reached the top of my front steps, I had to put my parents on an inflatable mattress and float them up the street thru chest-deep water. I don’t want to stick around thru another one.
kalakal
@like a metaphor:
Trackthetropics shows the spaghetti models in full https://www.trackthetropics.com/
here’s the page for Beryl
https://www.trackthetropics.com/beryl-2024/
At this time out they’re a bit flaky
trollhattan
@kalakal: Love “Do not use this map to make decisions!”
https://www.tropicaltidbits.com/storminfo/02L_tracks_latest.png
You can just make out Trump’s Sharpie off to the very right-hand edge.
E.
@trollhattan: This is exactly the kind of lawsuit that never would have succeeded under Chevron.
Yet Another Haldane
Today’s vocabulary word is “ventile.” It’s hard to look up because the first few pages of results are all for a treated cotton fabric inconveniently named Ventile(TM). Turns out that in this context a ventile is a 1/20 quantile, analogous to quartile (1/4) and percentile (1/100). Why “vent?” Dunno!
I learneding!
Hoppie
@Yet Another Haldane: Latin root. Compare the Italian word “venti” meaning twenty.
jonas
I forget exactly where I saw the reporting on it (maybe in The Atlantic a while back?), but there is this vicious cycle in the re/insurance business where companies are now scrambling to limit their exposure to extreme weather events being driven by climate change, while simultaneously trying to recoup their losses by underwriting the (very well-paying) fossil fuel and extraction industries that are causing said climate change. Kind of like a health insurance company trying to balance their losses on lung cancer patients by investing in Big Tobacco.
Steve in the ATL
@Hoppie: and “vingt” in French.
ETA: thanks all for the “having kittens” info!
JKC
The online Sunday edition of the Albany NY newspaper had an article today about the continued outmigration from NY to places like Florida. I wonder how long Florida’s appeal for transplants is going to last as the storms worsen and insurance becomes so steep it makes NY’s oft-maligned property taxes look like a relative bargain.
Xenos
@Yet Another Haldane: Like a “venti” coffee at Starbucks, being 20 oz?
Another Scott
@like a metaphor:
NHC.NOAA.gov ‘s Beryl page has forecast maps. They make the point that there is large uncertainty farther out in time.
HTH!
Cheers,
Scott.
Another Scott
@EmbraceYourInnerCrone: I was late again. ;-)
Cheers,
Scott.
like a metaphor
@kalakal: thank you
@Another Scott cheers, man!
jonas
@JKC: Property taxes in FL aren’t really much better. It’s usually the income tax people are looking to ditch, which isn’t that bad until you get into some very high tax brackets. I think a lot of people moving to TX or FL thinking it will be so much cheaper and freer will find out they were sold a bill of goods and that by the time you add up the higher property insurance, weigh the shitty hot weather against the shitty cold weather, and discover there is little or no safety net in red states for a lot of stuff (e.g. unemployment, disability, abortion care, etc.), it’s not such a great deal.
lowtechcyclist
@JKC:
I don’t know, but it’s just crazy down there. Not just places like Anna Maria Island, where a week’s rental is 2.5x what it was five years ago, but also used-to-be-blue-collar central FL towns like Plant City, where in the fall of 2022 we sold my wife’s grandmother’s house (before it fell apart) for at least 3x what we would have expected just three years earlier.
And yeah, homeowners’ insurance has gone through the roof in Plant City, just like everywhere else down there. There’s absolutely no way I’d buy a house down there anymore. Between the storms and floods, and its becoming just too damned hot and humid for too much of the year, fuhgeddaboutit.
EmbraceYourInnerCrone
@Another Scott: Hey we are all helping out. I am paranoid about hurricanes after living in Guam, Hawaii and Florida then got hit by tropical storm Sandy and Irene. People forget Irene but that one beat the Hell out of upside NY and Vermont.
Van Buren
@Steve in the ATL: how do you say “20 wines” in French?
Ksmiami
@E.: have faith. AI will create its own energy solutions within 10 years… these guys are corrupt clowns
Bill Arnold
@TBone:
Been watching Hurricane Beryl with great interest. :-)
Palm Beach County is reliably Democratic (56 percent for Biden in 2020).
So, no Orleans (Parish) or Palm Beach County.
Galvaston county was 60 percent Trump in 2020, though.
JKC
@lowtechcyclist: Yeah, a colleague of mine moved down there a couple of years ago with her husband. They lost their house during one of the recent hurricanes (I think it was Ian) but seemed determined to stay there. Damned if I know why…
S Cerevisiae
I’ve been saying for over a decade now that when one of the big re-insurers (Munich Re, Swiss RE, Lloyds, etc.) goes under, that’s a sign that the shit has really hit the fan.
Barry
@JKC:
“The online Sunday edition of the Albany NY newspaper had an article today about the continued outmigration from NY to places like Florida. I wonder how long Florida’s appeal for transplants is going to last as the storms worsen and insurance becomes so steep it makes NY’s oft-maligned property taxes look like a relative bargain.”
And as the DeSanity cuts deeper and deeper.