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What Extreme Weather Events Are Doing to Global Insurance Markets

As reinsurers such as Lloyd’s of London and Swiss Re reprice the risk of climate catastrophes following another year of record-breaking year of insurable losses, what role will insurance and reinsurance play in real estate and site selection going forward?

Appearing on Bloomberg’s Odd Lots podcast, Artemis.bm owner and Reinsurance News found Steve Evans mused about the potential impacts of government-mandated climate risk exposure. 

“If you start to disclose that kind of thing and your shareholders are seeing these potential big negative numbers on your balance sheet — even if they don’t manifest it’s still something that really any sensible business owner should be taking steps to protect against. So, there’s also potentially going to be more demand [for insurance] that comes out of climate legislation as well.”

Growing demand at a time of soaring prices is guaranteed to help redraw the map of which regions, Zip codes, and buildings are considered trustworthy assets. Don’t wait for the insurance markets to do it for you — visit www.climatealpha.ai to learn how our Climate Price™ analytics produces risk-adjusted forecasts down to individual assets. Every place has a climate price — what’s yours? 

#climaterisk #insurance #reinsurance

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Catastrophe Reinsurance Set to Soar After Year of Extreme Weather

Natural catastrophes caused an estimated $115 billion in 2022, according to the Swiss Re Institute, with $50-$65 billion of that from #HurricaneIan alone. That’s nearly 50% above the 10-year average of $81 billion, and part of a steady 5-7% rise in insurable losses each year acording to the Financial Times.

That means a lot of pain for reinsurers like Swiss Re, which cover the risk for the insurers themselves. And that, in turn, means the cost of property catastrophe insurance is set to go up next — way up. British investment bank Peel Hunt estimates the cost may rise 30% in 2023, while Lloyd’s of London parent Beazly believes it could soar as much as 50%. As a result, the market for reinsurance is grinding to a halt as reinsurers and brokers tussle in repricing risk, with Aon’s top reinsurance executive warning of “friction and uncertainty.”

Clearly, this is no longer business as usual. As the soaring cost of reinsurance ripples through property markets, real estate in Florida and elsewhere will be repriced in tandem, while more resilient regions will look increasingly attractive in turn.

Our tools help reinsurers and investors alike understand the new realities of resilient geographies and arrive at the “Climate Price.” Visit www.climatealpha.ai to learn more about how we can help you in the year ahead.

#climaterisk #creditrisk #reinsurance #riskmanagement #climateadaptation #catrisk

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Adam Tooze & the Global Housing Downturn

Formerly white-hot American housing markets such as Austin, Seattle, and Cape Floral, Florida are now facing the steepest declines — bad situations made worse by recent climate disasters, including wildfire smoke and Hurricane Ian. But the real crisis is unfolding overseas, where property markets in China, Sweden, Canada, and others are grinding to a halt. Tooze spells it out:

“In the global economy there are three really large asset classes: the equities issued by corporations ($109 trillion); the debt securities issued by corporations and governments ($123 trillion); and real estate, which is dominated by residential real estate, valued worldwide at $258 trillion. Commercial real estate ($32.6 trillion) and agricultural land add another $68 trillion. If economic news were reported more sensibly, indices of global real estate would figure every day alongside the S&P500 and the Nasdaq. The surge in global house prices in 2019-2021 added tens of trillions to measured global wealth. If that unwinds it will deliver a huge recessionary shock.”

This is the moment Climate Alpha was made for. As the polycrisis scrambles once-reliable economic formulas and triggers a worldwide flight to quality in the world’s overwhelmingly largest asset class, our tools literally tell investors where to go as opposed to when to sell. 

Our Climate Price™ analysis suite generates risk-adjusted valuations of real estate portfolios out to 2040 under multiple scenarios, including the effects of rapid interest rate hikes and faster-than-expected climate change impacts.

Visit www.climatealpha.ai to learn more about how we can help you start preparing for what comes after the crash — or if there isn’t one.

#realestate #housing #climaterisks #creditrisks #housingbubble

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The Uninsurables: How Storms and Rising Seas are Making Coastlines Unliveable

The Guardian investigated the coastlines of Canada citing figures from the Insurance Bureau of Canada, a trade body, these 800,000 homes concentrated in the Atlantic Provinces and other coastal areas represent 90% of the Canadian insurance industry’s financial liability. In response, the industry is pushing for a federal government-run insurance scheme similar to the United States’ own troubled National Flood Insurance Program.

“The private market, on its own, cannot handle the level of risk that’s escalating in the system without some sort of formal government backstop or direct participation,” the IBC’s Craig Stewart told The Guardian. Over the last 15 years, for instance, insurance claims from severe weather events have quadrupled, including September’s Hurricane Fiona.

Climate change poses a clear and present danger to a Canadian housing market already under severe stress due to rising interest rates, underscoring how simple rules of thumb — Canada is inherently safer than south Florida — are not just wrong, but also dangerous. At Climate Alpha, our models include variables such as the overall health and structure of housing and insurance markets to create more accurate forecasts of risk and opportunities in the decades ahead. Visit Climate Alpha’s Products Page to learn more about what our tools can do for U.S. customers — and soon, our Canadian ones.

#realestate #flooding #climateadaptation #climaterisks #creditrisk

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Why Ian May Push Florida Real Estate Out of Reach for All but the Super Rich

The New York Times discusses how Hurricane Ian’s record breaking cost will make it even harder for many to get insurance — Florida’s insurance market faces collapse as FEMA and reinsurers alike reprice the risks and race premiums accordingly. The result might be a housing market in which homeownership is the sole preserve of those with deep enough pockets to buy a house in cash and pay to rebuild at any price.

“Ian’s aftermath shows how climate change is increasingly eroding the financial underpinnings of modern American life,” writes The New York Times‘ Christopher Flavelle. “Without insurance, banks won’t issue a mortgage; without a mortgage, most prospective homeowners can’t buy a home. With fewer buyers, home prices fall, and new development can slow or even come to a stop.”

While Florida has held out against this vicious circle for decades, past results do not guarantee future performance. At Climate Alpha, our suite of tools help homebuilders, developments, asset managers, and reinsurers — not to mention homeowners themselves — understand these risks and steer them to neighboring opportunities. Visit Climate Alpha’s Product Page to learn more about how we can help you understand when — and where — the American Dream is at risk… and where it’s thriving.

#realestate #flooding #climateadaptation #climaterisks#creditrisk #sustainablefinance

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