Hurricane Ian could be the costliest storm to ever hit Florida, with property analysts estimating that the cost of damage caused by the Category 4 storm could reach up to $47 billion. That places last week’s tempest among the other most destructive storms in U.S. history, with Katrina topping records at $89.7 billion in damage, adjusted for inflation.
But Ian slammed into Florida at a time when the state’s flood and storm damage protection industry is limping, leaving open the possibility that some victims of the storm will be waiting years for reparations.
In the months preceding Ian’s landfall last Wednesday, six insurance providers covering the Sunshine State went bust, after underwriting losses exceeding $1 billion for the second year in a row. In July the Florida Office of Insurance Regulation placed a further 27 insurance providers on a watchlist over concerns that they are no longer financially viable.
A government-backed insurer, Citizens Property Insurance Corp, assumed liability for the households previously insured under the six now-defunct providers. The number of policyholders under Citizens Property protection has doubled in the past two years. Fallout from Hurricane Ian could easily lead to more bankruptcy in the sector, if a surge in damages claims exceeds the amount insurance brokers have in reserve. More bankruptcies would force more debt on taxpayers by way of government-backed insurance schemes.
The cost to federal coffers could have easily been higher if more Floridians had taken out flood insurance. But the ferocity of the hurricane caused storm surges in areas that aren’t usually prone to flooding. According to Politico, only 29% of households in the nine worst-hit districts have federal flood insurance.
Mohsen Rahnama, chief risk modeling officer at Risk Management Solutions (RMS), told catastrophe bond news site Artemis that “Ian has the potential to be one of the largest catastrophe losses for the insurance industry” and that he believes “this event will change the Florida insurance market landscape.”
Following Ian’s unprecedented impact zone and the Federal Emergency Management Agency’s (FEMA) revelation last month that climate change has rendered its flood prediction maps woefully inaccurate, you can expect millions more homeowners to see insurance premiums rise.
In Florida, a state whose land the Atlantic writer Michael Grunwald describes as “such a soggy mush of low-lying marshes that mapmakers couldn’t decide whether to draw it as land or water,” home owners already pay an average four times more on insurance premiums than elsewhere in the U.S.
If more insurers go bankrupt and homeowners fall into delinquency, flood insurance will become less obtainable for more Floridians, despite the importance of policy ownership growing with climate change. But how bad will it have to get before people stop building and rebuilding homes on low-lying, coastal swamp land?
The southern state is home to the fastest growing residential areas in the U.S., with newcomers drawn by the promise of zero income tax and a year-round summer. The storms are devastating but relatively rare—a compromise most Floridians seem willing to make.
If building is to continue, legislation could at least change to mandate new properties incorporate climate adaptation into their design. Grunwald cites one Florida neighborhood, Babcock Ranch, self-styled as America’s first solar-powered town, that could be a model for redevelopment.
Despite Ian roaring overhead last week, the community of roughly 4,600, surrounded by untouched nature reserves and built 25-feet above sea level, never suffered a loss of electricity—unlike the more than 2.7 million Floridians tied to the state grid. The town’s local wastewater management services ensured the community retained drinking water, and none of the storm-resistant housing blew away.
Incorporating policies like Babcock’s state-wide could potentially lower insurance premiums for all residents.
Back to $100
OPEC+, the oil producing cartel, is reportedly planning a major cut to production this week, orchestrating the biggest fall in oil output since the pandemic began. Oil prices have traded high on the rumor, with international Brent crude rising 3% on Tuesday to $91.80 per barrel. The cartel is meeting in Austria on Wednesday, to decide on future production. CNBC
A BBC investigation found that major oil companies including BP, Exxon and Chevron, are underreporting greenhouse gas emissions by failing to disclose the gas flaring at subcontracted oil fields. Gas flaring is a process of burning methane that leaks from oil or gas wells, producing carbon dioxide and other toxins in the process. According to the BBC, in 2021, unreported emissions from gas flares accounted for 20 million tonnes of CO2 equivalent, roughly the same volume of GHG 4.4 million cars produce in a year. BBC
Demand for natural gas has slumped in China, providing an opportunity for Chinese energy importers, locked into long-term purchasing agreements with the U.S., to re-export liquified natural gas (LNG) at a high margin. The long-term purchasing deals are part of China’s concession to the Trump-era trade war, but COVID-lockdowns decimated domestic demand. Now the fuel shortage in Europe is providing a new market for the resale of LNG in an unlikely trade triangle that benefits China and the U.S. WSJ
The next major UN meeting on climate change, COP27, is due to be held in Egypt next month, but politics are already jeopardizing the success of the international summit. Some human rights activists have called for governments to boycott the conference in protest of Egypt's record of persecuting political dissidents and LGBT people. Meanwhile the U.K., which hosted COP26 and should offer a smooth transition to the next host, has undergone A major change in leadership. The country’s new Prime Minister Liz Truss has opened new licenses for fracking, walking back from the government’s commitment to net zero, and has yet to commit to attending the upcoming conference. Guardian
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10 to 1
The number of electric vehicle charging points in Manhattan now out strips the number of gas stations more than 10 to one, with 320 EV chargers compared to 29 gas stations. The density of EV chargers in the borough points to the economic shortfalls of building low-profit gas stations in areas with high land scarcity. Real estate is simply too valuable to waste on idle pumps, while EV chargers can be coupled with parking spaces. For now, across the whole city of New York, gas stations are still in the lead, with 697 stations compared to 520 charging points.
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