In Between Times 6-9-2023
Climate change increasing your insurance costs? Getting baked in the urban heat island, Mayor Adams in NYC criticized for addressing crime/immigration
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Climate change, Rising insurance costs, Man-made impacts
In another life, right out of college, your editor was an insurance underwriter for a large insurance company. My territory was the Norfolk/Virginia Beach area. My job was to assess potential risk to the company from the customers we insured. One area of particular interest to us was potential flooding (which is actually covered through federal flood insurance) and potential wind damage from hurricanes. I looked at hurricane maps, flood maps, and where our insureds were in areas of particular risk.
One issue we found, and this was 20 years ago, was that our potential exposure to risk exceeded the level we deemed acceptable because so many people were building near the water and building bigger. This meant bigger losses potentially for we the insurance company in the event of large storm. An area that might have exposed the company to $500 million in losses in years prior might have grown over the decades to a $1 billion exposure or more.
The people with subsidized flood insurance in risky areas often bought property and casualty insurance for non-flood related claims from us. Though these people were at high risk for flood loss, they were also often at high risk for other types of losses. Losses we as a company were on the hook for.
Really, these people should never have been able to build in these areas at all.
Let me put it this way. When I was younger I spent a fair amount of time surfing. My home break was a beach in front of one of Virginia Beach’s most exclusive neighborhoods. I can remember looking at the houses, which even back then were worth $2-3 million, and wondering how it was that people could possibly afford to build a house there. I knew historically speaking that a catastrophic storm would come along one day and take a lot of the houses out. It was only a matter of time. Given that how could these houses ever get insured?
Plus when they built the houses the builders levelled the dunes so that the homeowners could have better views. Dunes are one of the ways a beach stabilizes itself. How in the world could such a house be built? $3 million on the edge of an often angry sea?
Federal flood insurance.
Much of the coast on the East Coast would be development free if it were not for this government program. One reason the program continues despite encouraging the degradation of the coastline and the cost to taxpayers is that the people who live directly on the ocean tend to be wealthy and politically connected. They want their beach homes protected, and without the taxpayers underwriting their flood insurance their properties suddenly become uninsurable.
Their position is understandable, if selfish. Consider what Nantucket, The Hamptons, or West Palm would look like if there was no taxpayer funded flood insurance. They’d be a lot more empty that is for sure.
But in the face of climate change and rising sea waters over the next half century we are going to have to decide if we want to continue covering these landowners, or as they are sometimes called - sandowners.
The above is one part of a very complicated property and casualty equation. One that is made more complicated by climate change.
In the west we have wildfires, but what is rarely talked about is that we often let people build where wildfires are part of the natural regenerative process. Though as things get dryer these fires might are likely to worsen, the increasingly large losses from wildfires are often because people are living on hillsides where they should not be, where fires are part of the ecosystem. A neighborhood of $4 million homes in Malibu is a big risk for an insurance company. If it’s a guarantee that one day a fire is going to blow through a neighborhood sooner or later why do we develop this land?
In addition to that, regulators (particularly in California) have forced insurance rates to artificially low levels, a move that is popular with homeowners, but which does not let insurance companies to properly price for risk. Axios reports;
In California, regulators have blocked insurers from raising rates above a certain threshold, which insurers say has prevented them from covering the costs of their policies.
At an average of about $1,300 per year, home insurance rates there "have been artificially low for decades," Insurance Information Institute (III) spokesman Mark Friedlander tells Axios.
"This means insurers have been writing business there for this very high risk. And they've been losing money."
So, in the face of climate change and increases in population we are going to have to consider how to do things better. Maybe subsidizing insurance for people building in risky areas isn’t a good idea.
Additionally in the meantime, forcing non-market prices on companies for outsized risks is not only unfair to insurance companies, but also in the end hurts the homeowners who may find themselves one day with no insurance at any price as companies pull out of these artificially manipulated markets. According to the attached article private companies are starting to do this at increasing rates.
Perhaps we should consider ending subsidization of premiums and development in areas that will assuredly succumb to mother nature. Should the taxpayers subsidize wealthy sandowners on the East Coast and movie stars in the LA hills? Should we force insurance companies to insure at rates that could potentially put them out of business? Should we subsidize directly with American taxpayer dollars a flood insurance program that encourages widespread and ongoing environmental degradation and that exacerbates issues related to rising sea levels?
We’ve created an expensive insurance problem in this country. Now as populations get denser, closer to the coastline, and begin to feel the impacts of climate change we are going to have to start solving this problem. For some people the solution is going to hurt.
Click here for the Axios article.
Inside Climate News: Mining critical to renewable energy tied to hundreds of alleged human rights abuses
Empowering communities while streamlining clean infrastructure permitting
As we often say in this space, we the American people disagree on much, but we probably agree on more than we know. That is certainly the case with energy. At least that has been our experience, and it appears to have been the experience of The Bipartisan Policy Center which recently convened a workshop of policymakers from across the political spectrum on the issue of permitting reform.
One of the great obstacles in the way of us getting to a much cleaner energy future is our red tape strangled permitting process. Projects that should be quickly done are held up (sometimes for years) and made much more expensive than they should be.
Streamlining the permitting process is key. One can’t have a more sustainable energy future if the infrastructure can’t be installed.
(From The Bipartisan Policy Center)
While this roundtable was not designed to forge consensus, it did highlight the significant areas of bipartisan interest and the need for more creative problem solving. There was broad agreement that early and trusted community engagement is an effective tool in reducing permitting delays. The third-party and monitoring committee options specifically garnered significant interest and debate over program design decisions. Additionally, requiring or incentivizing agencies to conduct stakeholder engagement efforts prior to the EIS also received general support by participants.
This workshop was the first of a series that BPC will be convening over the coming months to facilitate across the aisle conversations on specific permitting reform considerations, including technology specific needs, administrative bureaucracy, and judicial review.
Click here for the article.
Urban heat islands: How high temperatures affect cities
It’s June and I just got back from meetings in Downtown Washington DC. It was hot. The period between when the cherry blossoms come out in March until late May is generally pretty pleasant in our nation’s capital, but when the heat hits, it hits hard.
Washington has always been hot and muggy in the summer but these days it’s particularly bad. One can feel the heat radiating off of the buildings and asphalt. Then in the late afternoon there is that blessed moment when the sun dips below the skyline. Relief.
Many cities bake in the summertime and as the climate warms up the top setting on the oven is higher than in the past. How can we reduce the impact of the urban heat island effect?
Answer: More trees, more reflective rooftops, and more open green areas.
(From Bold TV)
The severity of the urban heat island effect can vary from neighborhood to neighborhood based on these factors. Also, the elderly, young children, and low-income individuals generally experience the highest health risks of extreme city temperatures. And workers who spend most of their time outdoors in the summer should also take precautions. According to the Environmental Protection Agency, heat-related deaths and illnesses are rising. And they are approaching levels not seen since the summer of 2006, one the hottest recorded summers in history.
Click here for the article.
What IS an urban heat island?
Spoiler alert: NYC mayor could complicate Dem plans to retake the House
In New York there is a (relatively) new mayor and he has a tendency to think for himself, particularly on issues of crime and immigration.
Eric Adams’ independent thinking has ruffled some feathers within his own Democratic Party. The ruffled argue that Adams should not be highlighting crime and immigration challenges as challenges. They fear that because mayor Adams is addressing these issues the way he is he is ceding ground to Republicans in the suburbs of New York.
Though Adams is the mayor of the city and not the suburbs he still has great influence in the hinterlands of Long Island and upstate. As such, his relatively tough-on-crime message it is feared (by some New York Dems) puts wind into Republican sails as the 2024 House races get going.
(From Politico)
Evan Thies, an outside advisor to Adams, said those who criticized the mayor for highlighting crime in 2022 tend to gloss over the idea that he also offered solutions — among them a surge of police in subways to combat transit crime and changing the state’s bail laws, which the Legislature ultimately did. If his colleagues were to more fully embrace his message, as Adams has said they should, they might find themselves in better electoral circumstances.
“He is one of the few Democrats in the country who has taken the issue head on and has a lifetime of experience working on public safety issues, either as a police officer or civil rights advocate,” Thies said. “It gives him credibility on behalf of the party to show how a thoughtful approach to public safety can work…
Click here for the article.
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