Jerome Powell, chairman of the Board of Governors of the Federal Reserve System, was nominated by Donald Trump in 2018 and confirmed by the US Senate. President Joe Biden renominated him when he entered office in January of 2021. The job of the Fed chair is to provide a "safe, flexible, and stable monetary and financial system." That's it; there is no advocating for government policies or politics.
He has recently found himself in a firestorm of controversy, both from young climate protestors who heckle some of his speeches to enact climate policies and from MAGA and the minority GOP Senate, which accuse him of implementing climate change policies. Though targeted by both since he was confirmed, he recently made news when he spotlighted an overlooked contributor that persistent inflation is due to climate change, creating an increasingly uninsurable market.
In congressional testimony, he emphasized that home and automobile insurance losses have increased for the last few years, as any homeowner or renter should know that insurance costs have surged. Powell emphasized in congressional testimony that various types of insurance, including home and car insurance, have experienced substantial surges in recent years. That, he says, has impeded the Fed from meeting its 2% inflation target.
From UPI:
Recent data from the Bureau of Labor Statistics corroborates Powell’s observations, revealing a notable increase in the metric for auto insurance. This metric, encompassing physical damage, liability, and miscellaneous insurance coverage for private passenger vehicles, surged by 20.6% over the past year, with a 0.9% climb in February compared to the previous month. Additionally, a study conducted by S&P Global Market Intelligence unveiled a sharp 11.3% increase in homeowners’ insurance premiums in 2023. These spikes in insurance costs contribute to the broader inflationary pressures observed across the economy.
Experts attribute the escalating insurance premiums to various factors, including the impacts of climate change and rising prices for car parts. These factors drive up insurers’ costs, prompting them to pass on the expenses to consumers through higher premiums. As insurance costs continue to climb, they exert upward pressure on overall inflation rates, complicating the Federal Reserve’s efforts to manage monetary policy and stabilize prices.
The world is not even remotely ready for the climate impacts on urban areas to come. How can we be; how do we pick up and move cities the size of Houston or Boston? The Biden administration is toughening infrastructure due to passing The Bipartisan Infrastructure Deal Boosts Clean Energy Jobs, Strengthens Resilience, and Advances Environmental Justice. However, Senator Joe Manchin gutted what we need to do at scale. And here we are.
Forbes writes on the real estate market and climate change.
There continues to be a contentious debate, even now, as to the existence of climate change. But there are certainly marked changes taking place in the climate and the world in which we all live. These developments are having an impact in the real estate market as well, touching every aspect of the industry, from rising prices to the decline in popularity of specific regions.
Higher temperatures lead to more extreme weather systems and an increase in large-scale incidents, from massive hurricanes to wildfires, from gale-force storms to flooding. Where the real estate market is concerned, these incidents are making it tougher to manage the costs and condition of property on a yearly basis.
An annual increase in the temperature of the planet is triggering climate-related incidents that bring with them dangerous levels of wind, rain and flooding. But an increase in temperature can also have a direct impact on the costs of managing a rental property. It's projected that more tenants will rely on electricity to run fans and HVAC systems to stay cool. The same goes for an increase in water usage. These trends can place a higher burden on the electrical grid and city resources.
As a property owner, you're paying an increased cost for those utilities along with your tenants. The more demand for these resources, the more expensive they become. We're seeing these costs rise in real time, right now.
By now, everyone should know that greenhouse gas emissions amplify natural disasters, increasing the risk and power of heavy rainfall flooding, storm surges, wind storms, hail storms, wildfires, heat, and drought. The CIA describes the danger of a heating globe as a threat multiplier.
"If you're not worried, you're not paying attention," California Senator Bill Dodd
The BBC recently highlighted one woman's plight in Austin, Texas, where increased flooding has raised insurance costs for the Dove Springs neighborhood, most of whom can't afford to pay.
When Frances Acuña received her flood insurance quote for the coming year, she got a shock: it would be increasing from $450 to $1,893 (£355 to £1,490). "I couldn't pay it," she says. "And so now I don't have flood insurance. But I don't feel alone as most of my neighbours don't have flood insurance either."
Acuña, a single mother-of-three, lives in Dove Springs in south-east Austin, Texas, an area that had, until recently, escaped the mass gentrification seen in the rest of the city. That is changing, says Acuña. The astronomical rise in flood insurance, coupled with an affordable housing crisis, is pushing many historic Latino communities out of the area.
In March 2024, Acuña, who is an organiser at Go Austin, a coalition working to improve the health of local communities, will leave the neighbourhood she has lived in for decades. "I bought this house thinking I would die in it," she says, in tears over the decision she has been forced to make. "But I can't afford to live here anymore."
Acuña's insurance went up because of a change in floodplain mapping. In 2018, the National Weather Service updated its flood models to reflect 25 years' worth of flood data. Thousands of houses in Austin that were previously expected to flood only once in every 500 years were upgraded to a risk of once in every 100 years.
With the new data analysis indicating that Austin was at a higher risk of flooding than previously estimated, insurance policies for many homes skyrocketed. In the first half of 2023 alone, premiums in Texas rose by up to 16%.
Acuña didn't feel the change until she missed a payment at the beginning of 2024 – she had other bills to pay and couldn't spare the money. It meant her policy lapsed, and when she came to renew her policy, she was told about the dramatic increase.
According to Newsweek's reporting, Brookfield Asset Management Reinsurance Partnership is pulling out of nine states: Arkansas, California, Colorado, Louisiana, Minnesota, Oklahoma, South Carolina, South Dakota, and Washington. The reason? Uninsurable Peril
Soft prediction: political insurance wars, as the insurable seek to separate their fortunes from the uninsurable, and the uninsurable want to retain as many resources as possible to back public subsidies of risk (eg, public insurers of last resort).Alex Steffen
In Florida, major Insurance companies have already left. They are leaving homeowners dependent on smaller, less dependable companies. The Washington Post wrote on a study led by researchers at Harvard University, Columbia University and the Federal Reserve Board, is yet to be peer-reviewed but was published on SSRN, a website for scholarly papers, in December. It states that new insurers which are replacing the traditional ones in high-risk areas are "less diversified, hold less capital, and 20 percent of them become insolvent.". Researchers noted a " lax insurance regulatory environment."
Florida is at high risk of heavy rainfall, storm surge, and major category hurricanes that can devastate entire cities. The average cost for homeowners is $6,000, and the cost for rental units is the same or higher. Those costs are passed to tenants.
And here we are. To be clear, drastic sea level rise is baked in and will destroy coastal cities. Wildfires are baked in. Despite ignoring all the blinking red lights over the past decades, humanity will have to lie in the bed that we have made. There will be no do-over for the climate crisis. The best we can hope for is preventing the worst impacts, and that window is closing.
Once a home is uninsurable, the owner can’t find a buyer to get a mortgage. The banks will want their money back, the little gals and guys will be on their own, and fossil fuel companies will not pay a dime to help. They plan to burn every molecule of carbon on Earth, and they know we will let them do it.
Acapulco, already past its prime before Cat 5 hurricane Otis, remains a total disaster.
As I said, we will be on our own. This is from Bloomberg (behind a paywall).
Wealth and Glamour Give Way to Gangs and Devastation in Acapulco
Along the city’s beaches — where in another era Hollywood stars and vacationing millionaires created a heady mix of money and glamour — hotels and condo buildings look like empty shells. Most are abandoned, with missing facades and swimming pools full of muck.
It’s a grim scene after Hurricane Otis tore into the city in October as a Category 5 storm, leaving at least 50 people dead and an economic toll estimated at about $20 billion. Insurance companies have paid out just 9 billion pesos ($530 million) to property owners, according to government figures, and private investment has so far fallen well short of what’s needed to revitalize the city. Slim has sought help from others to invest in Acapulco, but had little luck so far. At least one flat out said no.
Bankers descending on Acapulco this week for a conference — Mexico’s biggest annual event for the finance industry — will be inland at the Palacio Mundo Imperial hotel, rather than at the iconic pyramid-shaped Princess Hotel on the beach, which was largely destroyed by the storm. Hotel capacity is now less than half what it was, according to Francisco Madrid, head of the Sustainable Tourism Advanced Research Center at Anahuac University in Cancun.
More than half the city’s traffic lights aren’t working, streets are cluttered with trash and washed-out roads have left some areas inaccessible. Many upscale restaurants are shut, and the marina is still filled with half-sunk yachts and other debris. The destruction curtailed fumigation efforts, and swarms of mosquitoes are causing an outbreak of dengue fever. Gangs looted hundreds of stores after the hurricane and remain in control of large parts of the city, mostly outside tourist areas.
“The recovery process seems to be going more slowly that I would expect,” said Chuck Watson, a disaster modeler with Enki Research in Savannah, Georgia. “Dengue fever and the ongoing problems with crime and corruption in the reconstruction process means recovery will be delayed and risky for some time.”
Make that eleven months.
