WEBVTT - Bloomberg Daybreak Weekend: Inflation, Weather, Baba 0:00:03.279 --> 0:00:06.160 This is Bloomberg Daybreak Weekend, our global look at the 0:00:06.200 --> 0:00:08.760 top stories in the coming week from our daybreak anchors 0:00:08.800 --> 0:00:12.119 all around the world, and straight ahead on the program Inflation. 0:00:12.560 --> 0:00:14.400 I'm Tom Busby in New York. 0:00:14.560 --> 0:00:17.079 I'm Karlin Hety here in London, where we're looking ahead 0:00:17.120 --> 0:00:21.000 to Europe's insurers reporting earnings admit extreme weather. 0:00:21.280 --> 0:00:23.759 I'm Brian Curtis in Hong Kong. We look forward to 0:00:23.920 --> 0:00:27.200 Ali Baba's earnings and to see if the environment has 0:00:27.240 --> 0:00:28.040 really changed. 0:00:28.320 --> 0:00:31.360 I'm Daily Liones in Washington, where we're thinking about libor 0:00:31.440 --> 0:00:33.680 strife and its impact on President Biden. 0:00:36.400 --> 0:00:40.400 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:40.440 --> 0:00:44.240 Eleve them three on New York, Bloomberg ninety nine to one, Washington, DC, 0:00:44.560 --> 0:00:48.560 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:48.880 --> 0:00:53.040 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:53.120 --> 0:00:55.720 the world on Bloomberg Radio, dot Com and via the 0:00:55.760 --> 0:00:57.000 Bloomberg Business App. 0:01:00.080 --> 0:01:00.640 Good day to you. 0:01:00.720 --> 0:01:03.480 I'm Tom Busby, and we begin today's program with Inflation, 0:01:03.800 --> 0:01:07.240 as we await July inflation data coming out this Thursday, 0:01:07.280 --> 0:01:09.080 and joining us to talk about what do you expect 0:01:09.120 --> 0:01:13.120 and so much more. Bloomberg's Global Economics and Policy editor 0:01:13.120 --> 0:01:13.840 Michael McKee. 0:01:13.880 --> 0:01:15.000 Michael, thanks for being here. 0:01:15.120 --> 0:01:16.040 Great to be here again. 0:01:16.160 --> 0:01:19.120 Well for starters, What are we expecting to see in 0:01:19.160 --> 0:01:20.800 the July consumer Prices report? 0:01:21.400 --> 0:01:23.000 I hate to do this to you, but I'll start 0:01:23.040 --> 0:01:26.360 by being a little nerdy here. We are expecting inflation 0:01:26.560 --> 0:01:29.920 to rise because there was no inflation in July of 0:01:30.000 --> 0:01:34.720 last year. Inflation came in flat at zero percent change 0:01:34.920 --> 0:01:37.479 in July of twenty twenty two. So if we get 0:01:37.520 --> 0:01:40.720 a little inflation, and we're predicting a little inflation, it 0:01:40.920 --> 0:01:43.760 just is going to make inflation overall go up. So 0:01:43.800 --> 0:01:46.880 we're expecting at this point a two tenths percent gain 0:01:46.959 --> 0:01:49.400 for the month of July, which would push inflation up 0:01:49.400 --> 0:01:52.920 to three point two percent from three percent. Obviously, that 0:01:53.280 --> 0:01:56.640 is something the Fed is going to look through and 0:01:56.880 --> 0:01:59.200 analysts are going to look through and not think it's 0:01:59.640 --> 0:02:00.720 a may your issue. 0:02:00.800 --> 0:02:03.800 Well, the Fed last month in June three percent. That 0:02:04.000 --> 0:02:07.520 was very encouraging. Still, the Fed voted unanimously to hike 0:02:07.560 --> 0:02:10.320 ats benchmark lending grade twenty five basis points. That's after 0:02:10.639 --> 0:02:13.960 a slight pause in the previous meeting. What would it 0:02:14.000 --> 0:02:18.080 take in terms of CPI for the Fed to change 0:02:18.160 --> 0:02:21.040 up to pause again to know what would we they 0:02:21.080 --> 0:02:21.440 look for. 0:02:22.360 --> 0:02:24.840 J Powell was asked that question at his news conference 0:02:24.880 --> 0:02:27.400 after that FED decision, and basically he said it would take. 0:02:27.320 --> 0:02:28.920 Several months of a trend. 0:02:29.240 --> 0:02:32.919 In other words, if we saw inflation rising for several months, 0:02:33.280 --> 0:02:36.000 then they would start to think that we have a problem, 0:02:36.040 --> 0:02:38.680 that inflation is coming back and they need to crack 0:02:38.760 --> 0:02:42.480 down more. If inflation were a surprise to the downside 0:02:42.480 --> 0:02:45.919 this month and maybe another month, then the Fed might 0:02:46.000 --> 0:02:48.520 be inclined when they get to the September meeting to 0:02:48.600 --> 0:02:49.359 hold off again. 0:02:49.480 --> 0:02:51.359 And the next day we get producer prices. 0:02:51.680 --> 0:02:53.399 What have we seen there there? 0:02:53.440 --> 0:02:56.880 We've seen some disinflation. Producer prices have come down, particularly 0:02:56.919 --> 0:03:01.480 for energy and food and some of the more basic numbers. 0:03:01.520 --> 0:03:04.480 The issue is that we have seen oil prices rise 0:03:05.040 --> 0:03:09.320 in the last couple of weeks, and that could catch 0:03:09.880 --> 0:03:12.280 It wasn't through much of July, but that could catch 0:03:12.320 --> 0:03:14.320 on to the end of the survey and we could 0:03:14.400 --> 0:03:17.120 see end up seeing a little bit of a rise 0:03:17.480 --> 0:03:20.720 in headline producer prices. We'll be watching the core to 0:03:20.720 --> 0:03:24.080 see if progress continues to be made there. Producer prices 0:03:24.080 --> 0:03:27.520 and consumer prices are not directly linked because there are 0:03:27.600 --> 0:03:31.480 middlemen in the middle, but they give you a sort 0:03:31.520 --> 0:03:33.280 of trend idea of which way you're going. 0:03:33.480 --> 0:03:36.400 Now, you talked about energy prices. Oil prices back to 0:03:36.480 --> 0:03:39.040 eighty bucks a barrel. We haven't seen that in several months. 0:03:39.640 --> 0:03:42.080 Gasoline up twenty five cents a gallon in just the 0:03:42.120 --> 0:03:45.520 past week. So now there are legitimate factors in this, 0:03:45.640 --> 0:03:49.000 the heat O peck plus. But is there any end 0:03:49.160 --> 0:03:51.000 is demand is actually down? 0:03:51.720 --> 0:03:54.760 Yeah, the real problem has been time that we've had 0:03:54.960 --> 0:03:59.200 some refinery outages, especially down south, in part because of 0:03:59.240 --> 0:04:03.200 the heat, some unusual outages of refineries, and that's made 0:04:03.160 --> 0:04:06.320 gasoline more scarce. So the price has gone up, and 0:04:06.440 --> 0:04:09.760 there's a feeling that if and when things cool off 0:04:09.800 --> 0:04:12.080 down there. I feel lucky because we're in the Northeast 0:04:12.080 --> 0:04:15.360 where it's not been that hot, But if and when 0:04:15.400 --> 0:04:17.360 things cool off down there, then we should see the 0:04:17.400 --> 0:04:19.480 refineries come back online and prices dropped. 0:04:19.520 --> 0:04:21.400 So sometime within the next month. 0:04:21.680 --> 0:04:27.479 Now, obviously, as opek plus raises the price of the 0:04:27.520 --> 0:04:31.279 input to this oil, that's going to put some upward 0:04:31.320 --> 0:04:34.080 pressure on gasoline prices, but nothing to the extent that 0:04:34.120 --> 0:04:36.839 we have seen. And what would end up happening is 0:04:36.920 --> 0:04:40.880 gasoline prices would not rise by as much and so 0:04:40.920 --> 0:04:43.480 you'd see a down trend in headline. 0:04:43.520 --> 0:04:46.640 And again, people are not filling up like they were before. 0:04:46.720 --> 0:04:49.159 People still working from home, don't need the gas, so 0:04:49.839 --> 0:04:52.200 it's confounding to see it keep going up even though 0:04:52.240 --> 0:04:53.480 demand has leveled off. 0:04:53.800 --> 0:04:56.279 Well, it's been an unusual kind of situation. But what 0:04:56.400 --> 0:05:00.400 happened after this pandemic. Maybe people are flying more, people 0:05:00.400 --> 0:05:02.919 are ta I don't know about taking a train, but 0:05:03.000 --> 0:05:04.440 taking cruise ships, things like that. 0:05:04.480 --> 0:05:06.840 We've seen good reports from the airlines, so. 0:05:08.400 --> 0:05:11.120 Maybe it isn't a driving summer for a lot of people. 0:05:11.160 --> 0:05:13.080 And I guess with the heat that wait it is, 0:05:13.160 --> 0:05:14.600 you can understand. 0:05:14.120 --> 0:05:17.640 That well people are traveling. Part of that consumer confidence 0:05:17.640 --> 0:05:20.800 has moved higher. Fears about a recession. We just had 0:05:20.880 --> 0:05:24.840 last week Bank of America squash the previous forecast for 0:05:24.880 --> 0:05:29.120 a recession, but there are signs consumers maybe pulling back 0:05:29.160 --> 0:05:30.560 on their spending. Let me give you a couple of 0:05:30.560 --> 0:05:32.960 examples that I saw on that as Altria, the maker 0:05:33.000 --> 0:05:36.640 of Marlborough saying people are cigarettes are so expensive, they're 0:05:36.640 --> 0:05:41.520 buying discount smokes. Pepsi says, people want pepsi, but they're 0:05:41.520 --> 0:05:44.040 going to dollar stores, They're going to warehouse clubs trying 0:05:44.080 --> 0:05:47.680 to get a deal. So are we seeing that you 0:05:48.320 --> 0:05:51.240 are there signs that consumers are being more conservative. 0:05:51.279 --> 0:05:54.000 Now we're kind of getting back to spending levels and 0:05:54.000 --> 0:05:57.400 spending patterns that we saw before the pandemic. A lot 0:05:57.440 --> 0:06:01.360 of people went to the walmarts and dollar stores and 0:06:01.400 --> 0:06:04.040 things like that, trying to save money in the past 0:06:04.080 --> 0:06:08.160 on groceries, et cetera. And they're going back to that behavior. 0:06:08.560 --> 0:06:10.680 But this is all kind of what you would expect 0:06:10.839 --> 0:06:13.880 in a world that's not overstimulated by the government and 0:06:14.560 --> 0:06:19.240 that is facing higher interest rates and costs of doing business, 0:06:19.320 --> 0:06:21.599 because if it is trying to tamp down on demand, 0:06:22.160 --> 0:06:25.600 the issue becomes when it crosses some sort of line 0:06:25.960 --> 0:06:29.520 and we get to the point where people start to 0:06:29.520 --> 0:06:33.160 worry about recession and then pull back even more and 0:06:33.200 --> 0:06:35.919 we get what results in a contraction. 0:06:35.960 --> 0:06:38.360 And the clock is ticking on something that could really 0:06:38.480 --> 0:06:42.560 change that for forty million Americans. That's the looming restart 0:06:42.640 --> 0:06:45.680 of those federal student loan payments. And that's in October. 0:06:45.760 --> 0:06:46.960 That's coming up pretty quickly. 0:06:47.240 --> 0:06:49.560 That is coming quickly, and it's going to be interesting 0:06:49.600 --> 0:06:53.040 to see what happens because for a lot of people, 0:06:53.960 --> 0:06:58.560 they just use that money to spend on other things 0:06:58.600 --> 0:07:00.760 and in theory still have it. 0:07:00.800 --> 0:07:03.040 They just have to reprogram it to paying bills. 0:07:03.279 --> 0:07:06.280 But a lot of people took out other loans and 0:07:07.520 --> 0:07:09.920 use the money they were saving on their student loan 0:07:09.960 --> 0:07:12.000 bills to pay the other loans. And now they're going 0:07:12.040 --> 0:07:14.720 to have two sets of bills and one set of payments. 0:07:15.520 --> 0:07:19.440 And then there's another group that kept paying throughout the 0:07:19.640 --> 0:07:21.920 entire time period because they figured, well, it's going to 0:07:21.960 --> 0:07:25.600 come back anyway, and I should make progress on bringing 0:07:25.640 --> 0:07:28.520 down my loan, especially when they're not charging me interest. 0:07:29.120 --> 0:07:31.480 And so how that all plays out isn't going to 0:07:31.520 --> 0:07:34.760 be clear, but it isn't completely clear, but it is 0:07:34.840 --> 0:07:36.040 expected to have an impact. 0:07:36.080 --> 0:07:36.240 Now. 0:07:36.240 --> 0:07:39.480 I economists sort of extrapolate from the total number of 0:07:39.480 --> 0:07:43.840 people with loans and their average loan payment and come 0:07:43.920 --> 0:07:46.120 up with a number like a tenth or two tenths 0:07:46.160 --> 0:07:50.560 off GDP, so not a huge amount, but enough to 0:07:50.800 --> 0:07:51.960 make a difference. 0:07:51.560 --> 0:07:54.440 Well a huge amount for people in their twenties and thirties. 0:07:54.480 --> 0:07:56.680 I would think, well, let's talk a little bit more 0:07:56.720 --> 0:08:00.320 about the FED and their timeline the next meeting number 0:08:00.320 --> 0:08:03.800 twentieth right, correct, Well, what do we see between then 0:08:04.040 --> 0:08:07.000 and now that's going to influence the Fed's next decision 0:08:07.040 --> 0:08:10.600 as far as consumer spending, inflation, jobs, and more. 0:08:10.960 --> 0:08:15.400 Well, I've got the couple of jobs reports like the 0:08:15.440 --> 0:08:18.840 one we just saw, and we have another one coming 0:08:18.920 --> 0:08:21.200 up which will give us the August payrolls at the 0:08:21.240 --> 0:08:25.160 beginning of September, and then the CPI report we're talking 0:08:25.200 --> 0:08:28.240 about in another CPI report before they meet again, and 0:08:28.280 --> 0:08:32.280 we'll have one more PCE inflation report along with consumer 0:08:32.320 --> 0:08:35.160 spending at the end of August. So the Fed will 0:08:35.200 --> 0:08:38.160 have a couple of months worth of data before they 0:08:38.200 --> 0:08:39.880 meet again. And that goes back to the point I 0:08:39.920 --> 0:08:42.559 made about what Jay Poal said that they want to 0:08:42.600 --> 0:08:45.920 see a couple of months trend to have an idea 0:08:45.920 --> 0:08:48.200 of where we're really going with this. Are we seeing 0:08:48.240 --> 0:08:52.800 inflation come down and demand soften? Are we seeing incipient 0:08:52.920 --> 0:08:56.319 signs of a recession because people are pulling back a lot, 0:08:57.160 --> 0:08:59.920 or is inflation coming back? Those are the questions that 0:09:00.080 --> 0:09:02.080 they hope a lot of this data will answer. 0:09:02.000 --> 0:09:04.760 And it's not just our central bank, but in England 0:09:04.880 --> 0:09:08.640 and in the Eurozone they're dealing with very similar situations, 0:09:08.640 --> 0:09:11.800 but in a way a worse inflation problem over there. 0:09:11.960 --> 0:09:14.440 Is it influencing the US inflation or is. 0:09:14.440 --> 0:09:16.800 It the opposite? Are we helping them. 0:09:18.280 --> 0:09:21.360 At this point we are not helping Europe all that 0:09:21.480 --> 0:09:24.599 much because the dollar is strong, so their trade is 0:09:24.640 --> 0:09:31.040 not as vigorous with the US, but it does help 0:09:31.760 --> 0:09:35.920 the United States some now. Trade in this case, because 0:09:36.480 --> 0:09:40.000 we're in a post pandemic situation, is less important between 0:09:40.000 --> 0:09:42.520 the United States and these other countries than it is 0:09:42.679 --> 0:09:47.920 among those countries. The European Union trades heavily among itself, 0:09:48.000 --> 0:09:50.480 and people there have done sort of the same thing 0:09:50.520 --> 0:09:53.840 that we have in terms of cutting back on goods spending, 0:09:54.400 --> 0:09:58.199 and companies have cut back on investments and that's hurting them. 0:09:58.240 --> 0:10:02.800 Manufacturing powers like Germany in France and Italy there because 0:10:03.480 --> 0:10:09.600 their economies are struggling with the lack of manufacturing, and 0:10:09.920 --> 0:10:12.560 we've seen that in the PMI numbers, and we see 0:10:12.559 --> 0:10:15.600 that in the industrial production numbers in the UK. It's 0:10:15.640 --> 0:10:18.960 accommodation of things. It's a little bit of that but 0:10:19.120 --> 0:10:24.079 it's also the bureaucracy brought on by Brexit for trade 0:10:24.480 --> 0:10:28.640 has slowed trade and made it more expensive. They're still 0:10:28.679 --> 0:10:32.439 trying to negotiate new free trade agreements and they haven't 0:10:32.480 --> 0:10:35.520 had a lot of luck, certainly not with the United 0:10:35.559 --> 0:10:38.440 States yet, so they have the added costs from that 0:10:38.600 --> 0:10:41.720 as well. And then they've got a very strong labor 0:10:41.760 --> 0:10:44.240 market in the same way that the United States does, 0:10:44.440 --> 0:10:46.680 which also puts upward pressure on prices. 0:10:46.800 --> 0:10:47.760 Well, thank you, Michael. 0:10:47.840 --> 0:10:51.920 And that was Bloomberg's Global Economics and Policy editor Michael McKee. 0:10:51.920 --> 0:10:54.880 And coming up on Bloomberg day Break weekend, insurance companies 0:10:54.920 --> 0:10:58.400 attempt to change with climate change risk lurking. 0:10:58.679 --> 0:11:01.079 I'm Tom Busby and this is Bloomberg. 0:11:10.960 --> 0:11:13.280 This is Bloomberg day Break Weekend, our global look at 0:11:13.280 --> 0:11:15.760 the top stories in the coming week from our Daybreak 0:11:15.800 --> 0:11:17.480 anchors all around the world. 0:11:17.640 --> 0:11:19.840 Up later in our program. 0:11:19.280 --> 0:11:22.520 Earnings from Chinese e commerce giant Ali Baba and the 0:11:22.640 --> 0:11:26.040 Chinese government's role in tech in that country. But first, 0:11:26.440 --> 0:11:29.520 extreme weather gripping many parts of the world, with July 0:11:30.000 --> 0:11:33.160 likely to be announced as the world's hottest month on record. 0:11:33.600 --> 0:11:37.080 The impact on society is enormous and on the insurers 0:11:37.200 --> 0:11:39.680 who navigate climate change for more, or let's head to 0:11:39.720 --> 0:11:44.000 London and bring in Bloomberg Daybreak Europe anchor Caroline Hepgirk Tom. 0:11:44.160 --> 0:11:48.520 Europe's big insurers, from Alians to generally munich Ree and 0:11:48.640 --> 0:11:51.679 Zero Insurance, are reporting their earnings in the days ahead, 0:11:52.240 --> 0:11:56.480 but Europeans are among the least insured against certain types 0:11:56.520 --> 0:12:00.160 of extreme weather and other natural disasters, something that we've 0:12:00.160 --> 0:12:03.080 seen a lot of across the continent over the last 0:12:03.160 --> 0:12:06.480 few months. For more, I'm joined by Blomberg's Germany correspondent 0:12:06.520 --> 0:12:10.240 Oliver Crook. Oliver, great to have you with us. Extreme 0:12:10.280 --> 0:12:12.480 weather has hit Europe in the past few months in 0:12:12.520 --> 0:12:15.800 a way I think, I'm sure you'll agree that has 0:12:16.000 --> 0:12:19.800 made many people think about climate change in a totally 0:12:19.840 --> 0:12:21.640 new light. Don't you think I. 0:12:21.559 --> 0:12:23.520 Would think so? But you know, obviously, as you know, 0:12:23.559 --> 0:12:27.360 this is an exceedingly polarized issue for some people. It's hard, though, 0:12:27.400 --> 0:12:29.560 when you see the kind of trend in terms of 0:12:29.640 --> 0:12:32.640 the temperatures rising over the last century to kind of 0:12:33.080 --> 0:12:36.000 not at least pose yourself the question, particularly when you 0:12:36.000 --> 0:12:38.280 see the ways that it touches, you know, human life 0:12:38.320 --> 0:12:39.920 in all this different way. We've talked about how it 0:12:39.960 --> 0:12:43.439 touches agriculture. Sometimes it's cooking food right on. 0:12:43.400 --> 0:12:44.560 The branch you have. 0:12:44.840 --> 0:12:47.240 You know, all these rivers drying up. The Rhine is 0:12:47.240 --> 0:12:49.040 one we've talked about a lot of the most important 0:12:49.360 --> 0:12:52.280 waterway in Europe. You know that moves just tons and 0:12:52.320 --> 0:12:54.720 tons and tons down, up and down every single day, 0:12:54.760 --> 0:12:58.280 and that basically becomes unnavigable at a certain point. We've 0:12:58.320 --> 0:13:00.560 seen it in France with the nuclear react they can't 0:13:00.640 --> 0:13:03.880 draw enough water to cool off, and obviously these wildfires 0:13:03.880 --> 0:13:05.920 in Greece. So I think it's front of mine for everybody. 0:13:05.960 --> 0:13:08.400 I think the challenge that the market has is how 0:13:08.400 --> 0:13:10.120 do you price these risks and how do you think 0:13:10.160 --> 0:13:11.160 about these financially? 0:13:11.760 --> 0:13:11.920 Yeah? 0:13:11.960 --> 0:13:14.839 Absolutely, And you were speaking to someone very interesting Munich 0:13:14.920 --> 0:13:17.839 reads ernst Rauch about this, because they've got a whole 0:13:17.840 --> 0:13:22.240 climate center and they do big reporting not just on 0:13:22.320 --> 0:13:25.520 their own business, but kind of more broadly across the 0:13:25.559 --> 0:13:29.440 insurance sector. They've also Munich re itself has its earnings 0:13:29.520 --> 0:13:34.280 coming up in the days ahead. Is weather making certain 0:13:34.320 --> 0:13:35.600 things uninsurable? 0:13:36.280 --> 0:13:38.040 So this is the this is the question. I asked 0:13:38.080 --> 0:13:40.400 him if it made things uninsurable? And so he gave 0:13:40.400 --> 0:13:42.480 a sort of interesting response that he said, listen, we're 0:13:42.480 --> 0:13:45.560 an insurance company. We will ensure anything. The problem is 0:13:45.600 --> 0:13:47.560 you will not be able to afford it. And they 0:13:47.600 --> 0:13:49.720 look at a sort of simple equation about kind of 0:13:49.760 --> 0:13:52.760 the risk that is generated by kind of natural disasters, 0:13:52.880 --> 0:13:54.920 how vulnerable we know, how in what ways have you 0:13:55.040 --> 0:13:57.960 mitigated it, and the underlying value of the assets, and 0:13:58.000 --> 0:14:00.480 he says that even despite the latter two, what he's 0:14:00.480 --> 0:14:04.920 seeing across the globe is a high higher risk of 0:14:05.040 --> 0:14:07.920 basically weather related events. He says eighty to ninety percent 0:14:08.320 --> 0:14:10.280 is down to weather, and that a third of all 0:14:10.320 --> 0:14:12.360 of the losses in the first half of this year 0:14:12.559 --> 0:14:14.560 we're not down to actually a single weather event, but 0:14:14.640 --> 0:14:17.560 just more powerful storms over in the United States. 0:14:17.840 --> 0:14:18.000 Yeah. 0:14:18.040 --> 0:14:22.320 Absolutely, And the data that munich Re pulled together showing 0:14:22.360 --> 0:14:25.600 a near record year for losses due to natural disasters, 0:14:25.640 --> 0:14:28.920 so things like earthquakes in Turkey and Syria and the 0:14:28.960 --> 0:14:31.560 storms that you mentioned in the US. I mean, the 0:14:31.640 --> 0:14:33.600 numbers globally are quite staggering, aren't they. 0:14:34.200 --> 0:14:34.360 Yeah. 0:14:34.400 --> 0:14:36.520 Absolutely, I mean one hundred and ten billion dollars in 0:14:36.520 --> 0:14:38.720 the first half of the year. And really, again I 0:14:38.800 --> 0:14:41.320 was very interested to speak to him, because you know, 0:14:41.560 --> 0:14:44.200 in a topic that is polarized for many people, it's 0:14:44.240 --> 0:14:47.360 their business to understand what is going on in the 0:14:47.360 --> 0:14:49.680 world and to try to appraise that risk. So I 0:14:49.720 --> 0:14:52.720 asked him about kind of how he really thinks about 0:14:52.720 --> 0:14:54.600 climate change and how many you know, how much are 0:14:54.640 --> 0:14:57.800 these losses can we say are really attributable to climate change? 0:14:58.120 --> 0:15:02.600 We observe up what of losses from weather related events 0:15:02.640 --> 0:15:05.840 in many parts of the world, and with many weather 0:15:05.880 --> 0:15:10.120 related perils, depending on the region, it is flooding, it 0:15:10.160 --> 0:15:13.800 can be what's called these convective storms of severe thunderstorms 0:15:13.840 --> 0:15:16.880 in the United States, or wildfires in some parts of 0:15:16.920 --> 0:15:20.440 the world. So with this upward trend, we of course 0:15:20.480 --> 0:15:23.560 as a risk management company, we need to understand what 0:15:23.840 --> 0:15:27.840 are the drivers of this trend, and the first element 0:15:28.000 --> 0:15:33.360 of these drivers are socioeconomic factors, so increasing wealth and 0:15:33.440 --> 0:15:37.840 population and inflation of course today plays a major role 0:15:37.880 --> 0:15:42.800 in this as well. However, even after adjusting for inflation 0:15:42.920 --> 0:15:46.400 and wells, we do see in some regions upward trends 0:15:47.080 --> 0:15:50.160 with respect to losses which cannot be explained by these 0:15:50.160 --> 0:15:54.800 socio economic factors. And here we analyze and also meteorological data. 0:15:54.840 --> 0:15:59.560 We collaborate with scientific organizations in order to understand whether 0:15:59.600 --> 0:16:05.000 there is a link between increasingly severe weathers it's understorms 0:16:05.000 --> 0:16:08.680 of flooding, extreme rainfalls and others and the losses we observe. 0:16:09.120 --> 0:16:12.520 And the outcome is as of today, is that we 0:16:12.680 --> 0:16:17.600 have strong indications, not a scientific proof, but strong indications 0:16:18.000 --> 0:16:21.480 that part of the increase of losses is already driven 0:16:21.560 --> 0:16:25.600 by changing weather patterns, and they are by themselves driven 0:16:25.600 --> 0:16:26.960 by climate change, and. 0:16:26.920 --> 0:16:29.320 Sort of regardless of the cause. If this is just 0:16:29.400 --> 0:16:32.640 proportionally and numerically going up, this obviously is going to 0:16:32.680 --> 0:16:35.800 bear on the price of ensuring things. Can you talk 0:16:35.800 --> 0:16:38.400 to me about how much more expensive insurance is going 0:16:38.440 --> 0:16:40.240 to get as a result of these changes. 0:16:40.880 --> 0:16:45.040 Well, first of all, if the has a component of 0:16:45.160 --> 0:16:49.680 our analysis, so the probability of severe flooding or severe 0:16:49.840 --> 0:16:53.600 other weather events is increasing and or the intensity of 0:16:53.960 --> 0:16:58.560 these events, then yes, the overall risk increases. 0:16:57.920 --> 0:16:59.760 And that drives the premium. 0:17:00.240 --> 0:17:04.800 Now the question is, of course, by how much, and 0:17:04.880 --> 0:17:08.960 there is no simple answer, especially no uniform answer for 0:17:09.119 --> 0:17:11.160 all parts of the gold and all parents. 0:17:11.240 --> 0:17:12.720 I also want to talk to you about the risk 0:17:12.800 --> 0:17:16.000 not just of insurance prices going up, but basically parts 0:17:16.000 --> 0:17:19.120 of the world becoming unensurable. We hear about this in Florida, 0:17:19.440 --> 0:17:22.000 you know, California possibly a risk. Now we see kind 0:17:22.000 --> 0:17:25.040 of weather patterns changing and how hot it's getting across Europe. 0:17:25.720 --> 0:17:28.640 What's the risk for the uninsurable portions of the world 0:17:28.640 --> 0:17:30.560 where you just cannot make an assessment or it's just 0:17:30.600 --> 0:17:31.159 too risky. 0:17:31.680 --> 0:17:35.000 The challenge is much more if we look at the 0:17:35.200 --> 0:17:40.360 need to adjust our prices in line with increasing risks, 0:17:40.480 --> 0:17:44.120 and here climate change drives up the risks and as 0:17:44.119 --> 0:17:47.680 a consequent drives up the risk premium. 0:17:47.840 --> 0:17:51.159 So that was ernsw Ralph ahead of Corporate Climate Center 0:17:51.280 --> 0:17:55.040 at munich RE speaking to you Oliver. As we think 0:17:55.080 --> 0:18:00.280 then about you know, the financial consequences of this, how 0:18:00.320 --> 0:18:02.760 do we think about then the earnings that we're going 0:18:02.800 --> 0:18:06.040 to get from munich Re Zero Insurance, General ARLI and 0:18:06.119 --> 0:18:09.080 the other big insurance names across Europe. 0:18:09.359 --> 0:18:11.800 Yeah, so listen, I'll talk about Alians because they're sort 0:18:11.840 --> 0:18:14.080 of the biggest and they would released over on Thursday, 0:18:14.119 --> 0:18:16.119 and so they you know, they've actually have had a 0:18:16.119 --> 0:18:18.560 pretty good run. And what's interesting is because Alliance also 0:18:18.680 --> 0:18:22.800 has this massive asset management unit, but actually this year 0:18:23.480 --> 0:18:26.000 it's the insurance that's done the heavy lifting. Their insurance 0:18:26.000 --> 0:18:28.439 side of the business has done very well and they 0:18:28.440 --> 0:18:31.199 may even raise you know, operating profit outlook, and so 0:18:31.240 --> 0:18:34.320 things are looking very solid in the insurance sector. They've 0:18:34.320 --> 0:18:36.920 actually you know, they I don't know how big natural 0:18:36.960 --> 0:18:39.800 catastrophe will be in terms of their bottom line. We 0:18:39.880 --> 0:18:42.600 may see some more claims in Italy and Germany in 0:18:42.640 --> 0:18:44.920 the second quarter due to the floods, but they did 0:18:44.960 --> 0:18:49.000 not have huge natural catastrophe expenses over in the first quarter, 0:18:49.080 --> 0:18:51.679 and that is in part, perhaps, Caroline, something that we 0:18:51.760 --> 0:18:53.720 I'm sure we will talk about is the lack of 0:18:53.760 --> 0:18:56.960 insurance for natural disasters here in Europe. I was actually 0:18:56.960 --> 0:18:58.359 astounded by some of these numbers. 0:18:58.720 --> 0:18:58.880 Yeah. 0:18:58.880 --> 0:19:04.280 Absolutely, This, this idea of the underinsured in Europe is 0:19:04.800 --> 0:19:07.960 a big issue, especially as you say, you've highlighted, well, 0:19:08.000 --> 0:19:10.600 the wildfare is increased, but there've been drought conditions in 0:19:10.640 --> 0:19:13.080 Spain as well as along the River Rhine. 0:19:13.640 --> 0:19:13.840 Yeah. 0:19:13.840 --> 0:19:15.840 Absolutely. And when you look at a sort of global 0:19:15.880 --> 0:19:19.879 breakdown of kind of what is uninsured Asia Pacific, fifty 0:19:19.960 --> 0:19:23.320 seven percent of the direct losses are uninsured North America. 0:19:23.440 --> 0:19:26.879 That's only twenty four percent globally. On average, it's sixty 0:19:26.920 --> 0:19:30.679 one percent. In Europe it's almost ninety percent. So I 0:19:30.680 --> 0:19:32.600 mean that that to me came as a you know, 0:19:32.600 --> 0:19:34.119 as a real shock. You think of a kind of 0:19:34.200 --> 0:19:36.920 more developed nations and richer nations are kind of more 0:19:37.000 --> 0:19:39.760 risk averse and more willing to ensure certain assets, and 0:19:39.800 --> 0:19:42.200 I was really stunned to discover that that's the sort 0:19:42.240 --> 0:19:43.720 of European figure here. 0:19:44.359 --> 0:19:47.119 Absolutely, Oliver, thank you so much for joining me. We 0:19:47.160 --> 0:19:50.520 look ahead then and await the earnings in the next 0:19:50.520 --> 0:19:53.200 few days from the big insurance names hit in Europe 0:19:53.240 --> 0:19:57.520 Alians generally Munich, Re's Insurance and others, so there'll be 0:19:57.520 --> 0:19:59.560 a lot of focus on those results. Thank you so 0:19:59.640 --> 0:20:02.359 much for being with me. I'm Caroline Hepga here in London. 0:20:02.400 --> 0:20:04.080 You can catch us every weekday morning for we've been 0:20:04.160 --> 0:20:06.399 bag Daybreak. You're at the beginning at six am in London. 0:20:06.400 --> 0:20:07.720 That's one am on Wall Street. 0:20:07.800 --> 0:20:08.040 John. 0:20:08.760 --> 0:20:11.760 Thank you, Caroline, and coming up on Bloomberg day Break weekend, 0:20:11.920 --> 0:20:14.720 Ali Baba earnings and the Chinese tech industry. 0:20:15.160 --> 0:20:17.679 I'm Tom Busby. This is Bloomberg. 0:20:23.240 --> 0:20:25.360 I'm Tom Busby in New York with your global look 0:20:25.400 --> 0:20:28.080 ahead at the top stories for investors in the coming week. 0:20:28.160 --> 0:20:31.119 What's next for tech companies in China following the end 0:20:31.280 --> 0:20:34.680 of a government crackdown. Chinese e commerce giant Ali Baba 0:20:34.720 --> 0:20:37.160 among those in focus with an earnings report on tap 0:20:37.160 --> 0:20:39.360 and for more, Let's go to Hong Kong and Bloomberg 0:20:39.400 --> 0:20:41.840 Daybreak Asia host Brian Curtis. 0:20:41.640 --> 0:20:44.600