1 00:00:00,440 --> 00:00:03,880 Speaker 1: Hey, their listeners. Bloomberg wants to hear from you. Help 2 00:00:03,960 --> 00:00:07,040 Speaker 1: make shows like All Blots even better by taking the 3 00:00:07,080 --> 00:00:10,440 Speaker 1: Bloomberg Audience Survey, and you can get a coffee on 4 00:00:10,600 --> 00:00:14,480 Speaker 1: us for doing so. Visit YouTube dot com Forward Slash 5 00:00:14,520 --> 00:00:17,960 Speaker 1: Bloomberg Podcast and click the link in our profile or 6 00:00:18,000 --> 00:00:21,800 Speaker 1: the community section to take the Bloomberg Survey hosted by 7 00:00:21,840 --> 00:00:25,560 Speaker 1: our partners material Go to YouTube dot com Forward Slash 8 00:00:25,640 --> 00:00:27,440 Speaker 1: Bloomberg Podcast Today. 9 00:00:29,920 --> 00:00:43,480 Speaker 2: Bloomberg Audio Studios, Podcasts, Radio News. 10 00:00:45,920 --> 00:00:49,080 Speaker 1: Hello and welcome to another episode of the Audlots Podcast. 11 00:00:49,200 --> 00:00:50,559 Speaker 1: I'm Tracy Allaway. 12 00:00:50,280 --> 00:00:51,520 Speaker 3: And I'm Jill Whysenthal. 13 00:00:51,920 --> 00:00:53,800 Speaker 1: Joe, we need to do more on insurance. 14 00:00:54,280 --> 00:00:59,280 Speaker 3: Yeah, absolutely so. We are recording this October eighteenth. In 15 00:00:59,360 --> 00:01:03,640 Speaker 3: the last several weeks, we've had two extraordinary storms. The 16 00:01:03,760 --> 00:01:08,119 Speaker 3: second one, Milton, that aimed directly at Florida near Tampa Bay, 17 00:01:08,319 --> 00:01:12,080 Speaker 3: was not as bad as people thought even a few 18 00:01:12,120 --> 00:01:15,160 Speaker 3: hours before landfall, which people thought it's just going to 19 00:01:15,200 --> 00:01:20,200 Speaker 3: be tremendously catastrophic potentially. However, it was obviously still quoite damaging, 20 00:01:20,720 --> 00:01:25,240 Speaker 3: and once again the question of hurricane risk, storm risk 21 00:01:25,600 --> 00:01:29,240 Speaker 3: these certain flood prone markets, Who's going to pay for them. 22 00:01:29,280 --> 00:01:32,120 Speaker 3: All of these things continues to be a source of 23 00:01:32,200 --> 00:01:35,959 Speaker 3: I would say, rising anxiety regardless of what just happened 24 00:01:35,959 --> 00:01:36,559 Speaker 3: with these storms. 25 00:01:36,680 --> 00:01:40,679 Speaker 1: Yeah. Absolutely, And you've seen estimates flying around for how 26 00:01:40,760 --> 00:01:42,600 Speaker 1: much this is going to cost the insurers, but I 27 00:01:42,640 --> 00:01:44,559 Speaker 1: think there was one that said as much as fifty 28 00:01:44,560 --> 00:01:48,200 Speaker 1: five billion from those two storms, So big numbers here. 29 00:01:48,520 --> 00:01:51,920 Speaker 1: And obviously people who live in those areas have been 30 00:01:51,960 --> 00:01:55,080 Speaker 1: talking for a long time about how their insurance premiums 31 00:01:55,120 --> 00:01:58,560 Speaker 1: are already going up a lot, and certain areas of 32 00:01:58,600 --> 00:02:02,560 Speaker 1: the country are perhaps coming unaffordable, or maybe you can't 33 00:02:02,600 --> 00:02:06,920 Speaker 1: find insurance for a property on the coast of Florida anymore, 34 00:02:07,080 --> 00:02:09,200 Speaker 1: or if you do, you have to go to the 35 00:02:09,280 --> 00:02:13,200 Speaker 1: state insurance body rather than a private entity. And I 36 00:02:13,200 --> 00:02:15,720 Speaker 1: think just getting really a big picture, I find insurance 37 00:02:15,760 --> 00:02:20,200 Speaker 1: fascinating because it's basically the original finance y. It's like 38 00:02:20,360 --> 00:02:25,240 Speaker 1: the pricing of risk is essentially the very essence of finance. 39 00:02:25,320 --> 00:02:27,360 Speaker 1: So I find the idea of how we're going to 40 00:02:27,400 --> 00:02:30,320 Speaker 1: be pricing the risk of more and more storms, who's 41 00:02:30,360 --> 00:02:33,760 Speaker 1: going to bear those costs absolutely fascinating totally. 42 00:02:33,800 --> 00:02:36,760 Speaker 3: And we know there are structural issues going on in 43 00:02:36,800 --> 00:02:39,680 Speaker 3: the market and their myriad and we will get into 44 00:02:39,720 --> 00:02:42,600 Speaker 3: all them. But yes, there is much to discuss on 45 00:02:42,639 --> 00:02:45,680 Speaker 3: this topic on this episode in PRIT many episodes to come. 46 00:02:45,720 --> 00:02:48,520 Speaker 1: Okay, So in this particular discussion, we're going to be 47 00:02:48,520 --> 00:02:50,720 Speaker 1: coming at it from a slightly different angle. We're going 48 00:02:50,760 --> 00:02:53,840 Speaker 1: to focus on Florida, what's been happening in the structure 49 00:02:53,840 --> 00:02:56,680 Speaker 1: of that market and what else could be done. And yes, 50 00:02:56,840 --> 00:03:00,640 Speaker 1: I promise listeners there will be discussion about Flora roof 51 00:03:00,840 --> 00:03:03,400 Speaker 1: insurance frauds and all of that, because there are some 52 00:03:03,480 --> 00:03:07,080 Speaker 1: interesting things happening there as well. So I'm very happy 53 00:03:07,120 --> 00:03:09,480 Speaker 1: to say we do, in fact have the perfect guest. 54 00:03:09,760 --> 00:03:12,720 Speaker 1: We're going to be speaking with Jerry Theodoro. He is 55 00:03:12,800 --> 00:03:16,360 Speaker 1: the policy director of Finance, Insurance and Trade over at 56 00:03:16,480 --> 00:03:19,959 Speaker 1: Our Street Institute, which describes itself as a free market 57 00:03:20,000 --> 00:03:23,519 Speaker 1: think tank. He has written a lot about the Florida 58 00:03:23,560 --> 00:03:26,480 Speaker 1: insurance market. So Jerry, thank you so much for coming 59 00:03:26,480 --> 00:03:27,160 Speaker 1: on all lots. 60 00:03:27,440 --> 00:03:29,600 Speaker 4: Thank you, Tracy, thank you. Joe's a pleasure to be here. 61 00:03:29,880 --> 00:03:32,920 Speaker 1: So maybe give us your background just to start, because 62 00:03:32,960 --> 00:03:35,680 Speaker 1: you've been in the insurance world for a while. 63 00:03:36,480 --> 00:03:39,880 Speaker 4: Yeah. Thanks. I began my career as a commercial underwriter 64 00:03:39,960 --> 00:03:42,600 Speaker 4: at Chubb and Son, and after a couple of years, 65 00:03:42,640 --> 00:03:46,240 Speaker 4: moved over to AIG. AIG shipped me over to Europe 66 00:03:46,240 --> 00:03:48,840 Speaker 4: and I worked in Paris and Frankfurt in the Middle 67 00:03:48,840 --> 00:03:52,200 Speaker 4: East for about ten years as an expatriate, and after 68 00:03:52,200 --> 00:03:55,480 Speaker 4: coming back to the United States, I joined a company 69 00:03:55,480 --> 00:03:58,640 Speaker 4: called Conning. Worked at Conning for about a dozen years. 70 00:03:58,640 --> 00:04:02,200 Speaker 4: Conning is an insurance manager that has an insurance research arm. 71 00:04:02,520 --> 00:04:04,600 Speaker 4: I was one of the researchers there. One of the analysts, 72 00:04:04,640 --> 00:04:06,760 Speaker 4: wrote a lot of books, did a lot of presentations 73 00:04:07,280 --> 00:04:09,760 Speaker 4: on the insurance industry, and about three and a half 74 00:04:09,800 --> 00:04:13,040 Speaker 4: years ago I joined our Street and using my knowledge 75 00:04:13,080 --> 00:04:16,479 Speaker 4: of the market and economics and products connections in the 76 00:04:16,480 --> 00:04:21,560 Speaker 4: industry for public policy purposes to explain to folks in 77 00:04:21,720 --> 00:04:26,440 Speaker 4: Washington and state capitals how insurance works and recommended policy 78 00:04:26,520 --> 00:04:28,920 Speaker 4: solutions for areas that are troubling, like the one we're 79 00:04:28,920 --> 00:04:29,680 Speaker 4: discussing today. 80 00:04:30,040 --> 00:04:33,359 Speaker 3: You do sound, indeed like the perfect guest. You know, 81 00:04:33,520 --> 00:04:36,120 Speaker 3: let's say fifteen years from now, or let's say not 82 00:04:36,160 --> 00:04:38,480 Speaker 3: fifteen years from now, let's say today I was sixteen, 83 00:04:38,480 --> 00:04:40,440 Speaker 3: I'm like, all right, I'm ready to retire. I don't 84 00:04:40,480 --> 00:04:43,320 Speaker 3: want to live in the cold weather anymore. I just 85 00:04:43,360 --> 00:04:47,320 Speaker 3: wanted a nice little house in Fort Myers, Florida. But 86 00:04:47,400 --> 00:04:49,039 Speaker 3: I kind of want to get insured because it's a 87 00:04:49,040 --> 00:04:52,800 Speaker 3: big part of my retirement, this asset. What are my options? 88 00:04:52,800 --> 00:04:54,720 Speaker 4: What am I going to do? Well? First of all, 89 00:04:55,160 --> 00:04:57,799 Speaker 4: I agree, it's a lovely prospect to have a place 90 00:04:57,839 --> 00:05:00,880 Speaker 4: in Fort Myers where you can see the front from 91 00:05:00,880 --> 00:05:03,800 Speaker 4: your window. But when the ocean comes into your bedroom, 92 00:05:04,120 --> 00:05:06,600 Speaker 4: that's another story, and that's when you should reconsider if 93 00:05:06,680 --> 00:05:08,200 Speaker 4: you made the right decision. 94 00:05:08,920 --> 00:05:10,560 Speaker 3: But I made that decision, all right, So now I'm 95 00:05:10,600 --> 00:05:12,000 Speaker 3: making the insurance decision. 96 00:05:12,080 --> 00:05:14,760 Speaker 1: Now he has to get insurance for his retirement property. 97 00:05:14,800 --> 00:05:16,240 Speaker 1: What does he do? What are his options? 98 00:05:16,400 --> 00:05:20,440 Speaker 4: Yeah? Well, first of all, having homeowners insurance is not 99 00:05:20,480 --> 00:05:23,360 Speaker 4: only important, but it's required if you have a loan, 100 00:05:23,600 --> 00:05:26,120 Speaker 4: mortgage loan that's backed by the federal government one of 101 00:05:26,160 --> 00:05:30,039 Speaker 4: the GSS Fanny May Freddie Mech, so it's required. Some 102 00:05:30,080 --> 00:05:33,599 Speaker 4: people go bare, they don't carry insurance. And there are 103 00:05:34,720 --> 00:05:39,680 Speaker 4: three major sources of insurance for future retire research as yourself, Joe. 104 00:05:39,839 --> 00:05:44,240 Speaker 4: One is the national insurance market, so you're jumbo insurers 105 00:05:44,240 --> 00:05:48,560 Speaker 4: that operate nationally all state state farm Travelers, Hardford, and 106 00:05:48,640 --> 00:05:51,360 Speaker 4: the like, And there's also some companies that are the 107 00:05:51,640 --> 00:05:54,719 Speaker 4: so called Florida Domestics is your companies that were set 108 00:05:54,800 --> 00:05:59,680 Speaker 4: up following catastrophes about fifteen years ago that are focused 109 00:05:59,680 --> 00:06:02,599 Speaker 4: on flow and four of them are publicly traded. And 110 00:06:02,640 --> 00:06:06,440 Speaker 4: there's also Citizens Property Insurance. Citizens Property is a state 111 00:06:06,560 --> 00:06:10,680 Speaker 4: run ensure in Florida. So those are the three options, 112 00:06:10,720 --> 00:06:14,120 Speaker 4: and agents are the ones that are responsible for guiding 113 00:06:14,200 --> 00:06:16,320 Speaker 4: you to get the best policy for the best price. 114 00:06:16,920 --> 00:06:19,359 Speaker 4: So that's the market that you'll confront Joe when you 115 00:06:19,400 --> 00:06:19,800 Speaker 4: get there. 116 00:06:20,120 --> 00:06:25,160 Speaker 1: So insurers of last resort in Florida like Citizens, At 117 00:06:25,200 --> 00:06:28,640 Speaker 1: what point do you get access to those? Like I've 118 00:06:28,680 --> 00:06:31,479 Speaker 1: never really understood that no one else will give you 119 00:06:31,560 --> 00:06:33,640 Speaker 1: insurance or is it that no one else will give 120 00:06:33,680 --> 00:06:35,919 Speaker 1: you insurance at a price that you like? 121 00:06:36,200 --> 00:06:39,120 Speaker 4: Yeah, it's at a price that you like. So Citizens, 122 00:06:40,080 --> 00:06:42,960 Speaker 4: as you say, Tracy the insurer of last resort. So 123 00:06:43,000 --> 00:06:45,480 Speaker 4: if you agent can't place it with any of the 124 00:06:45,640 --> 00:06:49,920 Speaker 4: national or the Florida only domestics, then Citizens is required 125 00:06:50,279 --> 00:06:54,880 Speaker 4: to take that policy. However, if the Citizens policy proves 126 00:06:54,920 --> 00:06:58,080 Speaker 4: to be more expensive than one on the market, then 127 00:06:58,080 --> 00:07:00,400 Speaker 4: you're obligated to take one that's in the private market. 128 00:07:02,000 --> 00:07:05,479 Speaker 3: So people say there is an uninsurance crisis in Florida 129 00:07:06,160 --> 00:07:08,640 Speaker 3: due to the storms and due to other structural things. 130 00:07:08,880 --> 00:07:11,240 Speaker 3: I guess I have a two part question. A. Do 131 00:07:11,280 --> 00:07:14,239 Speaker 3: you accept a premise that there is something broken about 132 00:07:14,280 --> 00:07:17,600 Speaker 3: the in Florida insurance market as it stands right now? 133 00:07:18,120 --> 00:07:20,400 Speaker 3: And B how would you describe it. 134 00:07:20,560 --> 00:07:22,600 Speaker 4: I wouldn't say that it's broken, but I would say, 135 00:07:22,680 --> 00:07:25,080 Speaker 4: like a piece of porcelain that's cracked, it's got a 136 00:07:25,080 --> 00:07:27,320 Speaker 4: bit of a it's got cracks to it. And it's 137 00:07:27,360 --> 00:07:31,800 Speaker 4: more than just the risk of hurricanes and floods, because 138 00:07:31,920 --> 00:07:35,400 Speaker 4: Florida is, after all, mainly a peninsula jutting into warm 139 00:07:35,440 --> 00:07:37,960 Speaker 4: waters of the Gulf of Mexico and the Atlantic Ocean, 140 00:07:38,000 --> 00:07:41,720 Speaker 4: so it's prone to catastrophes. There have been storms in 141 00:07:41,760 --> 00:07:44,800 Speaker 4: Florida for as long as we've got data on that. Yeah, 142 00:07:44,880 --> 00:07:46,520 Speaker 4: let's go back to two thousand and four. In two 143 00:07:46,560 --> 00:07:50,760 Speaker 4: thousand and four, there were four landfalling storms that hit Florida. 144 00:07:51,440 --> 00:07:55,480 Speaker 4: Those were Charlie, Francis, Ivan, and Gene. And in two 145 00:07:55,480 --> 00:08:00,480 Speaker 4: thousand and five there was we call the KRW Katrina. Ilma. 146 00:08:00,720 --> 00:08:04,000 Speaker 4: Now Rita did the most damage to Florida. So there 147 00:08:04,000 --> 00:08:08,560 Speaker 4: were two back to back years of really strong hurricanes, 148 00:08:09,120 --> 00:08:12,560 Speaker 4: and the market took a licking and as they used 149 00:08:12,560 --> 00:08:15,840 Speaker 4: to say with TIMEX watch advertisements, but it kept on ticking. 150 00:08:16,120 --> 00:08:20,800 Speaker 4: So the market continued and what is more, fresh capital 151 00:08:20,920 --> 00:08:24,760 Speaker 4: came in after two thousand and five because banking on 152 00:08:24,840 --> 00:08:27,600 Speaker 4: the theory that, to paraphrase, that lightning doesn't strike the 153 00:08:27,600 --> 00:08:30,320 Speaker 4: same place twice. Indeed, the bet was a good one. 154 00:08:30,360 --> 00:08:32,200 Speaker 4: In two thousand and six and two thousand and seven, 155 00:08:32,400 --> 00:08:34,880 Speaker 4: there were no hurricanes that made landfall in Florida. The 156 00:08:34,920 --> 00:08:39,240 Speaker 4: insurance company recouped the amount that had lost, So the 157 00:08:39,240 --> 00:08:43,480 Speaker 4: market was functioning. And now we're in the wake of 158 00:08:43,559 --> 00:08:46,800 Speaker 4: Helene and Milton, and these questions are being asked, but 159 00:08:46,920 --> 00:08:49,800 Speaker 4: for a variety of reasons which I'd like to get into. Yeah, 160 00:08:49,880 --> 00:08:54,320 Speaker 4: the market is resilient. It has these walls that protect 161 00:08:54,440 --> 00:08:58,000 Speaker 4: the balance sheets of these companies because the risk is recognized. 162 00:08:58,280 --> 00:09:00,600 Speaker 4: So why is it cracked? The reason it's because that's 163 00:09:00,679 --> 00:09:03,040 Speaker 4: conventional insurance. Insurance companies are in the business. 164 00:09:03,040 --> 00:09:05,640 Speaker 3: By the way, I just years ago, Tracy, we did 165 00:09:05,679 --> 00:09:08,720 Speaker 3: an episode I went through an obsession with Florida history, 166 00:09:08,840 --> 00:09:12,360 Speaker 3: like an old old odd loss days like twenty fifteen. Oh, 167 00:09:12,360 --> 00:09:15,319 Speaker 3: we've did episodes about the nineteen twenty six hurricane and 168 00:09:15,400 --> 00:09:18,920 Speaker 3: the nineteen twenty eight ok Choby hurricane that caused the 169 00:09:18,960 --> 00:09:21,720 Speaker 3: Florida land that bubble. You know, Florida's history is not 170 00:09:21,760 --> 00:09:24,160 Speaker 3: just hurricanes, It's also history of bubbles and busts. 171 00:09:24,160 --> 00:09:26,320 Speaker 1: Sometimes I feel we've been doing the show too long 172 00:09:26,400 --> 00:09:28,760 Speaker 1: when it's like, oh, yeah, go to our back catalog 173 00:09:28,840 --> 00:09:32,240 Speaker 1: for the episode on the nineteen twenties Florida property bubble, 174 00:09:32,520 --> 00:09:34,680 Speaker 1: but just a catfish bubble. But I say too. 175 00:09:34,800 --> 00:09:37,440 Speaker 3: But I only say this to appreciate your point that 176 00:09:37,559 --> 00:09:40,679 Speaker 3: storms in Florida are certainly nothing new and nothing that 177 00:09:40,920 --> 00:09:43,840 Speaker 3: catches people really by surprise at this point. So anyway, 178 00:09:44,120 --> 00:09:46,680 Speaker 3: keep going on with what you were saying about why 179 00:09:46,720 --> 00:09:50,880 Speaker 3: there's cracks even if the storm story is nothing now right. 180 00:09:51,200 --> 00:09:56,079 Speaker 4: Other states also have catastrophe exposure Texas, California. But Florida 181 00:09:56,160 --> 00:09:59,360 Speaker 4: was special in a way that's unrelated to the risks 182 00:09:59,360 --> 00:10:02,880 Speaker 4: and the premium of insurance, and that is because of 183 00:10:02,920 --> 00:10:06,880 Speaker 4: the activity of the trial bar. In Florida. You have 184 00:10:07,040 --> 00:10:11,320 Speaker 4: billboards on every highway advertising if you have a truck accident, 185 00:10:11,840 --> 00:10:16,160 Speaker 4: call us. We had a two million dollar judgment, so 186 00:10:17,000 --> 00:10:22,080 Speaker 4: a lot of legal advertising and people are responding to that. 187 00:10:22,160 --> 00:10:25,920 Speaker 4: So insurance companies are getting sued in Florida more than 188 00:10:25,960 --> 00:10:28,160 Speaker 4: anywhere else in the country. Let me give you a 189 00:10:28,240 --> 00:10:31,880 Speaker 4: statistic here. Florida has got about eight percent of the 190 00:10:31,960 --> 00:10:35,480 Speaker 4: country's population, so it's got about eight percent of the 191 00:10:35,520 --> 00:10:39,400 Speaker 4: homes and the homeowner insurance policies in the country, but 192 00:10:39,520 --> 00:10:43,800 Speaker 4: it has seventy eight percent of the homeowner's litigation. So 193 00:10:43,840 --> 00:10:46,720 Speaker 4: the state of Florida alone has got four fifths of 194 00:10:46,760 --> 00:10:49,920 Speaker 4: the entire country's litigation. And what are the lawsuits. A 195 00:10:49,960 --> 00:10:53,800 Speaker 4: lot of them are related to what's called aob assignment 196 00:10:53,840 --> 00:10:57,240 Speaker 4: of benefits. So if you have a house that sustains 197 00:10:57,559 --> 00:11:01,000 Speaker 4: some damage, someone will come to your house and adjuster 198 00:11:01,640 --> 00:11:03,679 Speaker 4: and ask you to sign a form saying we'll take 199 00:11:03,720 --> 00:11:05,800 Speaker 4: care of the insurance for you. We'll put in a claim. 200 00:11:05,880 --> 00:11:09,280 Speaker 4: So they put in a claim and the damage was 201 00:11:09,320 --> 00:11:11,840 Speaker 4: not something that was caused by the storm. It's discovered, 202 00:11:11,920 --> 00:11:15,160 Speaker 4: for example, and the insurance company denies the claim, and 203 00:11:15,200 --> 00:11:17,760 Speaker 4: then the attorneys will sue the insurance company for a 204 00:11:17,840 --> 00:11:21,000 Speaker 4: high five figure amount and rather than fight it and 205 00:11:21,280 --> 00:11:23,840 Speaker 4: spend a lot of money more than the case is worth, 206 00:11:24,160 --> 00:11:28,640 Speaker 4: they settle. So this has attracted a cottage industry in 207 00:11:28,720 --> 00:11:34,200 Speaker 4: filing frivolous suits and giving Florida the reputation of being 208 00:11:34,679 --> 00:11:37,400 Speaker 4: owned and driven by the trial bar. 209 00:11:52,520 --> 00:11:56,560 Speaker 1: How did Florida become an environment for this type of 210 00:11:56,640 --> 00:12:00,320 Speaker 1: litigation to begin with? Like why is the trial bar 211 00:12:00,640 --> 00:12:02,839 Speaker 1: so big in that particular state. 212 00:12:03,960 --> 00:12:06,439 Speaker 4: Yeah, I don't want to get into politics, but. 213 00:12:07,600 --> 00:12:09,240 Speaker 3: We might actually have to get into politics. 214 00:12:09,240 --> 00:12:14,200 Speaker 4: But politics does play a hand. A lot of the donations, 215 00:12:14,240 --> 00:12:19,280 Speaker 4: the contributions that are made to local politicians campaigns comes 216 00:12:19,280 --> 00:12:21,640 Speaker 4: from the trial bar. This is on a national basis 217 00:12:21,679 --> 00:12:25,880 Speaker 4: and not just Florida, but in Florida it's especially the case. 218 00:12:25,920 --> 00:12:29,200 Speaker 4: And also there was some bad legislation that was passed 219 00:12:29,240 --> 00:12:34,040 Speaker 4: in Florida which permits these things. So the statutes are 220 00:12:34,240 --> 00:12:39,439 Speaker 4: unfavorable compared to others where a case that doesn't meet 221 00:12:39,800 --> 00:12:43,800 Speaker 4: the pleading standard is just not advanced. So you have 222 00:12:44,160 --> 00:12:46,319 Speaker 4: this situation. The good news is though, but about a 223 00:12:46,400 --> 00:12:49,080 Speaker 4: year and a half ago, the governor of Floridas signed 224 00:12:49,120 --> 00:12:52,840 Speaker 4: tort reform into law that would stop the process of 225 00:12:53,000 --> 00:12:57,080 Speaker 4: assignment of benefits and also one way attorney fees where 226 00:12:57,160 --> 00:13:01,880 Speaker 4: the insurance company pays the legal fees of the plaintiff. 227 00:13:02,320 --> 00:13:05,880 Speaker 4: A couple of other measures as well were struck down 228 00:13:06,280 --> 00:13:08,920 Speaker 4: by the Torot reform that was signed into law. But 229 00:13:09,040 --> 00:13:11,320 Speaker 4: that was sort of a rare event because in order 230 00:13:11,320 --> 00:13:13,800 Speaker 4: to get that done, it required the President of the 231 00:13:13,840 --> 00:13:17,000 Speaker 4: Florida Senate and the leader of the House and the 232 00:13:17,040 --> 00:13:20,600 Speaker 4: governor pushing in the same direction, and with someone in 233 00:13:20,640 --> 00:13:24,040 Speaker 4: the Florida legislature taking this on to drive it through. 234 00:13:24,080 --> 00:13:26,840 Speaker 4: So this is a situation that you don't get. I mean, 235 00:13:26,880 --> 00:13:29,040 Speaker 4: imagine what if it happened on a national level, would 236 00:13:29,040 --> 00:13:31,840 Speaker 4: have the House and the Senate and the White House 237 00:13:31,920 --> 00:13:34,640 Speaker 4: in the same pushing in the same direction. Not likely, 238 00:13:34,720 --> 00:13:37,880 Speaker 4: But in Florida it happened. Something similar happened in Texas 239 00:13:37,880 --> 00:13:41,199 Speaker 4: about fifteen years ago, and the results of Torot reform 240 00:13:41,640 --> 00:13:45,600 Speaker 4: are already being seen where the number of suits I 241 00:13:45,679 --> 00:13:50,120 Speaker 4: mentioned the seventy eight percent of the national total of 242 00:13:50,440 --> 00:13:54,720 Speaker 4: homeowners insurance litigations Florida, that's coming down, and also there's 243 00:13:54,760 --> 00:13:58,719 Speaker 4: a formal document that announces the intention to sue. Those 244 00:13:58,800 --> 00:14:01,720 Speaker 4: numbers are coming down as well. So Florida seems to 245 00:14:01,760 --> 00:14:05,360 Speaker 4: have turned a corner in terms of the you know, 246 00:14:05,400 --> 00:14:08,520 Speaker 4: whether the sky is falling and the place is uninsurable. 247 00:14:08,800 --> 00:14:11,720 Speaker 4: What does Wall Street say, Well, there's four of those 248 00:14:12,120 --> 00:14:14,840 Speaker 4: Florida only insurance companies. They give us a ticker that 249 00:14:14,880 --> 00:14:19,440 Speaker 4: are that are publicly traded. And when the news was 250 00:14:19,440 --> 00:14:24,680 Speaker 4: coming out of Noah about the approaching hurricanes, people started 251 00:14:24,720 --> 00:14:28,040 Speaker 4: selling the stock of those companies, about twenty five percent 252 00:14:28,680 --> 00:14:31,920 Speaker 4: reduction in the stock price. But when, as you say, Joe, 253 00:14:31,960 --> 00:14:35,400 Speaker 4: it was a disaster averted. It didn't go to Tampa, 254 00:14:35,480 --> 00:14:39,640 Speaker 4: neither Helene nor Milton, and it skewed North or skewed South. 255 00:14:40,160 --> 00:14:43,680 Speaker 4: Stocks rebounded and went up by about fifteen percent. So 256 00:14:44,160 --> 00:14:48,120 Speaker 4: this was really just another manifestation of what people in 257 00:14:48,160 --> 00:14:52,640 Speaker 4: the industry used to say about Florida insurance stocks sell 258 00:14:52,640 --> 00:14:53,800 Speaker 4: in May and go away. 259 00:14:54,000 --> 00:14:56,520 Speaker 3: Wait, can you tell us some of these names? Do 260 00:14:56,880 --> 00:14:58,560 Speaker 3: you have any name? I actually wouldn't want to look 261 00:14:58,600 --> 00:14:58,880 Speaker 3: them up? 262 00:14:59,360 --> 00:15:00,240 Speaker 1: All State would. 263 00:15:00,520 --> 00:15:02,200 Speaker 3: No, No, the Florida specific. 264 00:15:01,880 --> 00:15:04,200 Speaker 1: The Florida Pacific one, Yeah. 265 00:15:03,920 --> 00:15:09,520 Speaker 3: Florida, Yeah, who are they? Heritage HCI, Heritage Insurance Holding. 266 00:15:09,800 --> 00:15:12,840 Speaker 1: Someone needs to make a Florida insurance ETF so we can. 267 00:15:12,760 --> 00:15:17,280 Speaker 3: Just directly get exposure to Oh yeah, there you go. Okay, 268 00:15:17,440 --> 00:15:18,360 Speaker 3: it's still down. 269 00:15:18,320 --> 00:15:20,760 Speaker 4: Down, but it recovered, it didn't continue to go down. 270 00:15:20,840 --> 00:15:21,440 Speaker 3: Yeah, that's right. 271 00:15:21,480 --> 00:15:25,240 Speaker 4: So the rebound when it was a bullet that was 272 00:15:25,320 --> 00:15:30,920 Speaker 4: dodged because Helene went north of Tampa, it landed in Appalachicola, 273 00:15:31,440 --> 00:15:34,320 Speaker 4: and then when Milton was coming and headed towards the 274 00:15:34,360 --> 00:15:37,080 Speaker 4: Tampa Bay, it turned south at the last minute and 275 00:15:37,120 --> 00:15:41,080 Speaker 4: did damage to Sarasota. But in Tampa Saint Pete spared. 276 00:15:40,920 --> 00:15:44,080 Speaker 3: An HCI group. And that's actually at all time highs 277 00:15:44,200 --> 00:15:47,240 Speaker 3: right now, is it. Yeah, So that's and that's actually 278 00:15:47,240 --> 00:15:49,560 Speaker 3: a really interesting chart because it did plunge in the 279 00:15:49,600 --> 00:15:51,840 Speaker 3: middle of October, but now it's currently at all time highs. 280 00:15:51,840 --> 00:15:53,520 Speaker 1: Also, if you zoom out on a lot of these, 281 00:15:53,560 --> 00:15:55,760 Speaker 1: they are up quite a bit over the past year 282 00:15:55,840 --> 00:15:56,040 Speaker 1: or so. 283 00:15:56,240 --> 00:15:58,400 Speaker 3: Oh not quite, by the way, HgI, sorry I miss booked. 284 00:15:58,440 --> 00:16:00,000 Speaker 3: HG has not al time highs. It's it like an 285 00:16:00,200 --> 00:16:03,120 Speaker 3: fifty two weeks high. It was higher in twenty twenty 286 00:16:03,120 --> 00:16:06,120 Speaker 3: one for a while. So okay, But I like looking 287 00:16:06,160 --> 00:16:08,000 Speaker 3: at charts. This helps ground me. 288 00:16:08,160 --> 00:16:10,360 Speaker 1: Joe, stop looking at charts. Let me ask a tort 289 00:16:10,440 --> 00:16:14,040 Speaker 1: reform question. Okay. Tort law. Tort, by the way, for 290 00:16:14,080 --> 00:16:16,920 Speaker 1: those who don't know, is like a legal framework for 291 00:16:17,040 --> 00:16:20,960 Speaker 1: addressing compensation for wrongdoing. It's not criminal stuff, it's the 292 00:16:20,960 --> 00:16:23,200 Speaker 1: civil stuff. And the only reason I know that is 293 00:16:23,200 --> 00:16:25,560 Speaker 1: because I read a book about the station house fire 294 00:16:26,080 --> 00:16:28,680 Speaker 1: in Rhode Island, and that was I don't recommend it. 295 00:16:28,680 --> 00:16:30,600 Speaker 1: It's a good book, but don't read it because it's 296 00:16:30,640 --> 00:16:34,840 Speaker 1: one of the most disturbing cases of all time. But anyway, 297 00:16:35,320 --> 00:16:38,880 Speaker 1: I guess my question is, so tort reform happened in 298 00:16:38,920 --> 00:16:41,840 Speaker 1: Florida a couple of years ago, as you point out, Jerry, 299 00:16:42,120 --> 00:16:45,840 Speaker 1: But what was the turning point at which the state decided, actually, 300 00:16:45,880 --> 00:16:47,880 Speaker 1: this is a really big deal and we need to 301 00:16:47,960 --> 00:16:48,880 Speaker 1: do something about it. 302 00:16:49,520 --> 00:16:52,000 Speaker 4: Yeah, that's a great question. It was, I think when 303 00:16:52,000 --> 00:16:55,680 Speaker 4: it became evident that the number of lawsuits and the 304 00:16:55,760 --> 00:16:58,400 Speaker 4: volume of the lawsuits was getting so stratispheric that it 305 00:16:58,440 --> 00:17:01,600 Speaker 4: was really impacting the balance sheets of the companies that 306 00:17:01,640 --> 00:17:04,959 Speaker 4: were there and driving some to leave Florida, to exit 307 00:17:05,000 --> 00:17:07,280 Speaker 4: the state because they couldn't make a buck there. Why 308 00:17:07,320 --> 00:17:10,600 Speaker 4: stay and you know, throw good money after bad. So 309 00:17:11,040 --> 00:17:12,800 Speaker 4: a couple of years ago, it was at a conference 310 00:17:12,800 --> 00:17:15,080 Speaker 4: of the Florida Chamber of Commerce, and the mood was 311 00:17:15,119 --> 00:17:18,720 Speaker 4: all gloom and doom, and you know, the market is broken. 312 00:17:19,280 --> 00:17:24,600 Speaker 4: There were strains on the reinsure that is obligatory. An 313 00:17:24,600 --> 00:17:29,040 Speaker 4: obligatory reinsure these companies that Joe, you looked up in 314 00:17:29,280 --> 00:17:30,760 Speaker 4: a couple of seconds, I'm very impressed. 315 00:17:30,960 --> 00:17:33,920 Speaker 3: Well, then we have the Bloomberg terminal, oh plug for 316 00:17:34,080 --> 00:17:36,560 Speaker 3: our core product here at Bloomberg. But yeah, it makes 317 00:17:36,600 --> 00:17:37,200 Speaker 3: it very easy. 318 00:17:37,359 --> 00:17:41,560 Speaker 4: So those companies, Heritage, Universal, HgI and the other they're 319 00:17:41,560 --> 00:17:44,280 Speaker 4: aware of the risk. In order to protect their capital, 320 00:17:44,320 --> 00:17:47,439 Speaker 4: they buy a lot of reinsurance, which means that if 321 00:17:47,920 --> 00:17:51,040 Speaker 4: you hear that, oh, Heritage had six hundred million dollars 322 00:17:51,160 --> 00:17:54,200 Speaker 4: in losses or something, well most of that, a lot 323 00:17:54,200 --> 00:17:57,520 Speaker 4: of that, about eighty may ninety percent of that is reinsured. 324 00:17:57,920 --> 00:18:01,080 Speaker 4: So the risk is passed on to these reinsurance companies. 325 00:18:01,480 --> 00:18:04,840 Speaker 4: But the first one that's involved is the Florida Hurricane 326 00:18:04,840 --> 00:18:12,159 Speaker 4: Catastrophe Fund FHC Florida Hurricane Catastrophe Fund. And one of 327 00:18:12,160 --> 00:18:15,280 Speaker 4: the reasons why people were in gloom and doom mood 328 00:18:15,320 --> 00:18:17,320 Speaker 4: a couple of years ago, prior to tour reform is 329 00:18:17,359 --> 00:18:20,520 Speaker 4: because there appeared to be strains on that fund that 330 00:18:20,560 --> 00:18:23,560 Speaker 4: it was How is it funded? It gets the premiums 331 00:18:23,720 --> 00:18:27,440 Speaker 4: from the seedents, a company, a primary insurer like Heritage 332 00:18:27,680 --> 00:18:32,080 Speaker 4: or any other company will seed reinsurance and they pay 333 00:18:32,119 --> 00:18:35,119 Speaker 4: a premium for that and that's the revenue of the fund. 334 00:18:35,800 --> 00:18:40,200 Speaker 4: But because it's a public entity, it was underprising the reinsurance. 335 00:18:40,240 --> 00:18:45,120 Speaker 4: Reinsurance is provided mainly by these mammoth giant reinsurance companies 336 00:18:45,119 --> 00:18:49,199 Speaker 4: in Europe like Hanover Reswiss, Remunich, re score Re, And 337 00:18:49,320 --> 00:18:54,680 Speaker 4: there's also the capital market instruments, catastrophe funds, insurance link securities, 338 00:18:54,880 --> 00:18:58,560 Speaker 4: so third party capital coming in. You've got reinsurance available 339 00:18:58,600 --> 00:19:02,840 Speaker 4: in Bermuda, a big of Florida reinsurance capacity, and also 340 00:19:02,920 --> 00:19:05,360 Speaker 4: Lloyd's of London and less so in the United States. 341 00:19:05,480 --> 00:19:09,000 Speaker 4: So these companies are really protected because they're aware of 342 00:19:09,040 --> 00:19:13,120 Speaker 4: the risk that's there. So the reinsurance picture is one 343 00:19:13,160 --> 00:19:16,520 Speaker 4: that's very important because when you see that a company 344 00:19:16,560 --> 00:19:18,560 Speaker 4: had an X amount of loss, well, what's the net 345 00:19:18,600 --> 00:19:23,080 Speaker 4: loss after reinsurance? It'll be a fraction of the gross 346 00:19:23,119 --> 00:19:25,399 Speaker 4: loss because of the impact of reinsurance. So these are 347 00:19:25,440 --> 00:19:27,080 Speaker 4: like walls around the balance sheet. 348 00:19:27,119 --> 00:19:31,480 Speaker 1: But presumably if the gross losses for like the domestic insurer, 349 00:19:31,560 --> 00:19:33,800 Speaker 1: the first layer of insurance keep going up, then the 350 00:19:33,800 --> 00:19:36,760 Speaker 1: reinsurance premiums go up as well eventually. 351 00:19:36,880 --> 00:19:39,359 Speaker 4: Right, that's right. And here's some other news, which is 352 00:19:39,880 --> 00:19:44,520 Speaker 4: good news. Prior to Helene and Milton, reinsurance rates started 353 00:19:44,520 --> 00:19:46,960 Speaker 4: to come down. Reinsurance rates started to come down. The 354 00:19:47,240 --> 00:19:51,840 Speaker 4: June renewals, the mid year renewals showed some decreases in 355 00:19:51,920 --> 00:19:55,520 Speaker 4: the cost of reinsurance. So whereas there some Henny Penny 356 00:19:55,960 --> 00:19:59,320 Speaker 4: the sky is falling chicken little folks out there saying, oh, 357 00:20:00,000 --> 00:20:01,879 Speaker 4: it's just going to just get more and more expensive. 358 00:20:01,880 --> 00:20:04,560 Speaker 4: It's got nowhere to go but up, and we can't 359 00:20:04,560 --> 00:20:08,840 Speaker 4: buy insurance. Not necessarily, it's not true, because the rate 360 00:20:09,000 --> 00:20:11,520 Speaker 4: or the premium follows the risk that's there. So if 361 00:20:11,560 --> 00:20:13,760 Speaker 4: the risk goes down, then the rates go down. If 362 00:20:13,800 --> 00:20:16,480 Speaker 4: you look at workers compensation, a different line of insurance, 363 00:20:16,880 --> 00:20:20,280 Speaker 4: for the last twelve years, the rates for workers compensation 364 00:20:20,720 --> 00:20:25,120 Speaker 4: have been coming down because of improvements in safety at 365 00:20:25,320 --> 00:20:30,240 Speaker 4: manufacturing plants, other places, automation. So there we have a 366 00:20:30,320 --> 00:20:33,959 Speaker 4: good example of rates coming down because the risk has 367 00:20:34,040 --> 00:20:37,080 Speaker 4: come down. But people like ignore that because it's more 368 00:20:37,119 --> 00:20:38,880 Speaker 4: fun to talk about bad things happening. 369 00:20:38,920 --> 00:20:43,040 Speaker 3: And that's true, that's true. If everything's so fundamentally, I 370 00:20:43,040 --> 00:20:46,400 Speaker 3: guess structurally sound. You know, Wall Street does its thing. 371 00:20:46,520 --> 00:20:49,120 Speaker 3: It assesses the risks of a hurricane, it lays off 372 00:20:49,160 --> 00:20:52,280 Speaker 3: the risks of catastrophes to the catastrophe bonds, et cetera. 373 00:20:53,080 --> 00:20:56,400 Speaker 3: Why does the citizens even need to exist and why 374 00:20:56,400 --> 00:21:00,480 Speaker 3: do so many Florida homeowners either end up with citizens 375 00:21:01,080 --> 00:21:03,680 Speaker 3: or end up just going bare and not having insurance. 376 00:21:03,760 --> 00:21:08,160 Speaker 4: In Florida, the impact of the out of control lawsuit 377 00:21:08,240 --> 00:21:11,639 Speaker 4: abuse is what ended up driving up premium. So that 378 00:21:11,760 --> 00:21:15,280 Speaker 4: was a part from the risk. And this happens in 379 00:21:15,320 --> 00:21:18,600 Speaker 4: another states as well, where you have some sort of 380 00:21:19,280 --> 00:21:22,320 Speaker 4: damage to the private market when the free market is 381 00:21:22,359 --> 00:21:25,600 Speaker 4: having trouble making a decent return, and the insurance industry, 382 00:21:25,920 --> 00:21:28,560 Speaker 4: it's not a rich industry. It's not like other industries. 383 00:21:28,600 --> 00:21:30,560 Speaker 4: The S and P. I think the average margin is 384 00:21:30,600 --> 00:21:34,040 Speaker 4: fourteen percent and the insurance industry is about six percent. 385 00:21:34,400 --> 00:21:36,960 Speaker 4: So it's not as if those are fat rich companies. 386 00:21:37,200 --> 00:21:41,120 Speaker 4: They operated relatively slim margins. So when there is an 387 00:21:41,160 --> 00:21:45,080 Speaker 4: exodus of insurance companies from a particular state, then the 388 00:21:45,119 --> 00:21:48,440 Speaker 4: state will often establish its fund, which is supposed to 389 00:21:48,480 --> 00:21:52,240 Speaker 4: be a temporary stop gap until the market, the private 390 00:21:52,320 --> 00:21:56,800 Speaker 4: market reattains stability. This happened in California with Skiff, the 391 00:21:56,800 --> 00:22:01,320 Speaker 4: state run Workers' Compensation entity, and and other places as 392 00:22:01,359 --> 00:22:06,200 Speaker 4: well have had this sort of accordion type results where 393 00:22:06,359 --> 00:22:10,800 Speaker 4: business expands like citizens expanded a lot, and then you 394 00:22:10,880 --> 00:22:15,480 Speaker 4: have depopulation, which is the effort to take policies out 395 00:22:15,520 --> 00:22:19,800 Speaker 4: of citizens. So depopulation was happening and it is still happening. 396 00:22:20,640 --> 00:22:23,959 Speaker 1: Wait, depopulation efforts to take policies out of citizens. 397 00:22:24,160 --> 00:22:26,119 Speaker 4: That's right to put them back into the private market. 398 00:22:26,160 --> 00:22:28,920 Speaker 4: Because the private market now is out of the intensive 399 00:22:28,920 --> 00:22:31,560 Speaker 4: care unit. It's just in a recovery room. 400 00:22:32,160 --> 00:22:33,640 Speaker 1: What's been the success rate on that. 401 00:22:33,800 --> 00:22:36,159 Speaker 4: I don't have the numbers, but it started with a 402 00:22:36,200 --> 00:22:39,720 Speaker 4: trickle and it's continuing. We'll see what happens now in 403 00:22:40,200 --> 00:22:42,520 Speaker 4: the wake of Milton, to see how how much depopulation 404 00:22:42,720 --> 00:22:43,320 Speaker 4: there'll be. 405 00:22:44,119 --> 00:22:46,360 Speaker 1: So one thing I wanted to ask, just going back 406 00:22:46,359 --> 00:22:49,960 Speaker 1: to tort reform, is I take the point that making 407 00:22:50,000 --> 00:22:55,040 Speaker 1: it more difficult to file ridiculous lawsuits has made the 408 00:22:55,040 --> 00:22:58,120 Speaker 1: ease of business for insurers in the state a little 409 00:22:58,160 --> 00:23:02,359 Speaker 1: bit better. But I guess the downside is if you're 410 00:23:02,680 --> 00:23:06,439 Speaker 1: a consumer who experiences some sort of damage to your house, 411 00:23:07,160 --> 00:23:11,400 Speaker 1: maybe it makes you know, having actual conversations much less 412 00:23:11,440 --> 00:23:15,080 Speaker 1: litigation with your insurance company a lot more difficult. How 413 00:23:15,080 --> 00:23:17,959 Speaker 1: do you balance I guess the balance of power between 414 00:23:17,960 --> 00:23:20,080 Speaker 1: the consumer and the insurance company. 415 00:23:20,080 --> 00:23:25,000 Speaker 4: Here ye, the upper hand was held by the trial bar. 416 00:23:25,480 --> 00:23:29,159 Speaker 4: Where the concept of civil litigation, and again this is 417 00:23:29,200 --> 00:23:33,240 Speaker 4: civil litigation, not criminal litigation. These are torts, civil wrongs. 418 00:23:33,800 --> 00:23:37,760 Speaker 4: The emphasis in tort law, or the purpose in tort law, 419 00:23:38,320 --> 00:23:41,360 Speaker 4: is not to punish but to compensate. So many of 420 00:23:41,400 --> 00:23:46,920 Speaker 4: the large verdicts and settlements that have made it difficult 421 00:23:46,960 --> 00:23:50,920 Speaker 4: on the commercial side for people to create products, pharmaceuticals, 422 00:23:51,200 --> 00:23:56,600 Speaker 4: do research are being hit by these very large outside 423 00:23:57,200 --> 00:24:02,080 Speaker 4: judgments that have no real play in tort law. So 424 00:24:02,280 --> 00:24:07,520 Speaker 4: you have the expansion of juries, verdicts, and settlements that 425 00:24:07,560 --> 00:24:10,520 Speaker 4: are exacerbated by misbehavior on the part of the plaintiff, bar, 426 00:24:11,040 --> 00:24:16,320 Speaker 4: new legal theories, and aggressive attempts to extract those large 427 00:24:16,359 --> 00:24:20,919 Speaker 4: amounts punitive damages that are multiples of actual damages sustained. 428 00:24:21,359 --> 00:24:25,800 Speaker 4: So this is entering the topic of social inflation, the 429 00:24:26,160 --> 00:24:29,240 Speaker 4: expansion of the concept of tort, and a lot of 430 00:24:29,280 --> 00:24:31,439 Speaker 4: states have tried to put an end to that with 431 00:24:31,640 --> 00:24:36,240 Speaker 4: legislation like Florida, did in order to keep services and 432 00:24:36,359 --> 00:24:40,680 Speaker 4: businesses at prices that are not unaffordable, because this ends 433 00:24:40,760 --> 00:24:42,800 Speaker 4: up driving up the costs of things. When you have 434 00:24:43,240 --> 00:24:46,200 Speaker 4: companies that are paying hundreds of millions of dollars or 435 00:24:46,280 --> 00:24:51,680 Speaker 4: tens of millions for actions that are not necessarily caused 436 00:24:51,680 --> 00:25:09,640 Speaker 4: by their activity, it's a distortion of the legal system. 437 00:25:09,880 --> 00:25:12,200 Speaker 3: Going back to insurance for a second, and I take 438 00:25:12,240 --> 00:25:15,760 Speaker 3: all this point about towards. Insurance is a key part 439 00:25:15,840 --> 00:25:19,120 Speaker 3: of what makes Florida a habitable place, a place where 440 00:25:19,119 --> 00:25:23,000 Speaker 3: people are going to invest assets to build. One aspect 441 00:25:23,040 --> 00:25:27,080 Speaker 3: of insurance or one aspect of risk is flood insurance. 442 00:25:27,400 --> 00:25:30,040 Speaker 3: And my understanding is that a big part of flood 443 00:25:30,080 --> 00:25:34,000 Speaker 3: insurance is national and federal funded. What is the role 444 00:25:34,160 --> 00:25:37,639 Speaker 3: of flood insurance in making parts of Florida safe to 445 00:25:37,680 --> 00:25:40,080 Speaker 3: build in? And who pays for that flood insurance? 446 00:25:40,760 --> 00:25:43,880 Speaker 4: Man? Right you are, Joe. Flood insurance is provided mainly 447 00:25:44,400 --> 00:25:48,520 Speaker 4: through a government program called the National Flood Insurance Program, 448 00:25:49,000 --> 00:25:54,000 Speaker 4: and the program has been around for several decades, and 449 00:25:54,160 --> 00:25:58,840 Speaker 4: it covers flood insurance because flood damage is not covered 450 00:25:58,840 --> 00:26:01,960 Speaker 4: in the conventional home owner's policy, say the H three 451 00:26:02,160 --> 00:26:07,919 Speaker 4: homeowners insurance policy so people buy flood insurance policies separately 452 00:26:08,400 --> 00:26:11,920 Speaker 4: from the National Flood Insurance Program the NFIP. So in Florida, 453 00:26:12,560 --> 00:26:16,240 Speaker 4: which is aware of the risk that's there, eighteen percent 454 00:26:16,280 --> 00:26:20,760 Speaker 4: of homeowners by flood insurance, whereas in North Carolina, which 455 00:26:21,119 --> 00:26:23,960 Speaker 4: hit really bad, tragically bad, a lot of loss of 456 00:26:24,000 --> 00:26:28,360 Speaker 4: life as well. In western North Carolina, only one percent 457 00:26:28,880 --> 00:26:33,640 Speaker 4: of the tar Heel state homeowners bought flood insurance from 458 00:26:33,680 --> 00:26:37,240 Speaker 4: the NFIP. Now there's been pressure because it's a government program, 459 00:26:37,520 --> 00:26:41,160 Speaker 4: a lot of it is underpriced, subsidized. Really it runs 460 00:26:41,160 --> 00:26:44,600 Speaker 4: at a deficit. There's been pressure to have the private 461 00:26:44,680 --> 00:26:47,439 Speaker 4: market come in and provide flood insurance. And here the 462 00:26:47,440 --> 00:26:50,520 Speaker 4: good news is that the private market is finally starting 463 00:26:50,520 --> 00:26:53,760 Speaker 4: to grow. NFIP has got about three point one billion 464 00:26:53,800 --> 00:26:56,919 Speaker 4: dollars in premiums, whereas the private market is estimated to 465 00:26:56,960 --> 00:27:00,720 Speaker 4: have about one point four So almost half of the 466 00:27:00,760 --> 00:27:04,000 Speaker 4: federal flood is now provided by the private market, whereas 467 00:27:04,040 --> 00:27:06,160 Speaker 4: a couple of years ago, the private market was virtually 468 00:27:06,200 --> 00:27:10,040 Speaker 4: nonexistent because nobody would buy it at the risk adjusted rates. 469 00:27:10,359 --> 00:27:14,640 Speaker 4: So now you have a healthier situation. Problem is though, 470 00:27:14,680 --> 00:27:17,119 Speaker 4: that the NFIP is going to bear a lot of 471 00:27:17,119 --> 00:27:22,560 Speaker 4: the losses from Helene and Milton because we know about 472 00:27:22,640 --> 00:27:26,840 Speaker 4: the storm surge one two feet of water and these torrential, 473 00:27:27,000 --> 00:27:32,080 Speaker 4: violent rains that brought down mud and flooded homes, really 474 00:27:32,160 --> 00:27:34,840 Speaker 4: destroying lots of property. So over the flood and the 475 00:27:34,880 --> 00:27:37,920 Speaker 4: storm surge, we're not covered by the h R three policies, 476 00:27:37,960 --> 00:27:41,399 Speaker 4: but are covered by the NFIP and the gap there 477 00:27:41,840 --> 00:27:44,440 Speaker 4: with only eighteen percent of fluirdines having the insurance, I 478 00:27:44,480 --> 00:27:47,000 Speaker 4: think it's going to send a message because the message 479 00:27:47,040 --> 00:27:49,440 Speaker 4: that we've been trying to send as we educate folks 480 00:27:49,480 --> 00:27:52,320 Speaker 4: about insurance and how it works, is that you need 481 00:27:52,359 --> 00:27:54,600 Speaker 4: to spread the risk. You need to have a pool 482 00:27:54,680 --> 00:27:58,399 Speaker 4: of risk in order to absorb the losses when they happen. 483 00:27:59,040 --> 00:28:02,639 Speaker 3: To put it bluntly, are taxpayers in less flood prone 484 00:28:02,680 --> 00:28:06,639 Speaker 3: areas currently subsidizing the construction of homes and more flood 485 00:28:06,640 --> 00:28:07,280 Speaker 3: prone areas. 486 00:28:07,680 --> 00:28:10,640 Speaker 4: Yes, they are, and that's a problem. The fact that 487 00:28:10,840 --> 00:28:14,880 Speaker 4: you have construction in areas that are in harm's way, 488 00:28:15,320 --> 00:28:18,040 Speaker 4: and when you have a development that's by the coast, 489 00:28:18,119 --> 00:28:21,720 Speaker 4: you're going to have impermeable surfaces. When you have asphalt, 490 00:28:22,000 --> 00:28:24,359 Speaker 4: there's nowhere for the water to go so it stays 491 00:28:24,400 --> 00:28:27,880 Speaker 4: inside homes or it backs up. So well, there's one 492 00:28:27,920 --> 00:28:31,000 Speaker 4: word which I focused on when I think about catastrophes 493 00:28:31,080 --> 00:28:35,679 Speaker 4: and then Florida, and that is resilience. Resilience strengthen homes 494 00:28:35,760 --> 00:28:41,640 Speaker 4: capacities to withstand these kinds of storms. Florida has recognized 495 00:28:41,640 --> 00:28:43,200 Speaker 4: the issue. So if we look at the track of 496 00:28:43,760 --> 00:28:48,080 Speaker 4: Helene a few weeks ago, because Michael hit Florida in 497 00:28:48,200 --> 00:28:52,880 Speaker 4: the Gulf area, in the Big Bend area, the Panhandle side, 498 00:28:53,080 --> 00:28:56,720 Speaker 4: building codes were strengthened, houses were built to code. But 499 00:28:57,120 --> 00:29:00,760 Speaker 4: when Helene crossed the border from Florida to Georgia, there 500 00:29:00,800 --> 00:29:03,520 Speaker 4: was much more destruction in Georgia because Georgia does not 501 00:29:03,680 --> 00:29:07,160 Speaker 4: have those stringent building codes that you need to have 502 00:29:07,840 --> 00:29:11,920 Speaker 4: to really make your house more resilient. So resilience is 503 00:29:12,000 --> 00:29:14,600 Speaker 4: key on a national basis. I turned back to nineteen 504 00:29:14,640 --> 00:29:18,720 Speaker 4: fifty three when the Dutch Dutch low country below seawater 505 00:29:19,600 --> 00:29:23,480 Speaker 4: flooded lots and lots of times for centuries. Nineteen fifty 506 00:29:23,520 --> 00:29:27,080 Speaker 4: three they had a horrible storm there and they said, basta, well, 507 00:29:27,120 --> 00:29:31,720 Speaker 4: it's not Dutch, but the Dutch equivalent enough, I guess 508 00:29:31,840 --> 00:29:36,520 Speaker 4: Kanuck and they had a big project to build levees 509 00:29:36,600 --> 00:29:40,000 Speaker 4: and other sort of defense systems, and they haven't had 510 00:29:40,200 --> 00:29:44,160 Speaker 4: a massive flood loss since. And also we compare Hurricane 511 00:29:44,240 --> 00:29:48,440 Speaker 4: Katrine of two thousand and five to Ida exactly sixteen 512 00:29:48,560 --> 00:29:51,160 Speaker 4: years later. We remember two thousand and five when the 513 00:29:51,240 --> 00:29:55,360 Speaker 4: levees burst in New Orleans. Then after that the levees 514 00:29:55,360 --> 00:29:59,600 Speaker 4: were strengthened and the city survived Ida, which was as 515 00:29:59,720 --> 00:30:03,720 Speaker 4: power full of storm for Louisiana. So that demonstrates that 516 00:30:04,120 --> 00:30:07,480 Speaker 4: resilience works. There's a ratio that's typically used in the 517 00:30:07,480 --> 00:30:11,920 Speaker 4: industry that one dollar of resilience results in six dollars 518 00:30:12,320 --> 00:30:14,040 Speaker 4: of disaster relief averted. 519 00:30:14,400 --> 00:30:16,360 Speaker 3: By the way, Tracy, I'm just gonna say, if there 520 00:30:16,360 --> 00:30:19,920 Speaker 3: are any academic economists listening to this episode, do a 521 00:30:19,960 --> 00:30:24,360 Speaker 3: paper on the Florida verg Georgia damage and the natural 522 00:30:24,400 --> 00:30:28,320 Speaker 3: experiment we saw on updated building code. It sounds like 523 00:30:28,360 --> 00:30:30,239 Speaker 3: it's there for the taking for someone looking for their 524 00:30:30,280 --> 00:30:31,040 Speaker 3: master's thesis. 525 00:30:31,120 --> 00:30:33,320 Speaker 1: That's a good idea. Wall I had a question, so 526 00:30:33,400 --> 00:30:36,960 Speaker 1: we talked about reinsurance. But the funny thing about insurance 527 00:30:37,120 --> 00:30:40,560 Speaker 1: is that there's always another layer, it feels like, so 528 00:30:40,600 --> 00:30:44,760 Speaker 1: there is reinsurance for reinsurers as well, what's been going 529 00:30:44,800 --> 00:30:46,160 Speaker 1: on with rates there? 530 00:30:46,880 --> 00:30:49,520 Speaker 4: That's right, there's reinsurance for reinsurers as well. That's the 531 00:30:49,840 --> 00:30:53,440 Speaker 4: retro the retro market, and the rates and the retro 532 00:30:53,520 --> 00:30:56,200 Speaker 4: market typically are similar to what you have on the 533 00:30:56,240 --> 00:30:59,920 Speaker 4: primary market, so they sort of move hand in glow. 534 00:31:00,600 --> 00:31:03,720 Speaker 4: There are going to be renewals of a lot of 535 00:31:03,760 --> 00:31:06,560 Speaker 4: reinsurance treaties in January one, the one to one renewals 536 00:31:06,600 --> 00:31:13,760 Speaker 4: is when most global reinsurance treaties renew. And whereas as 537 00:31:13,800 --> 00:31:16,520 Speaker 4: I said earlier, rates have started to come down in 538 00:31:16,560 --> 00:31:21,520 Speaker 4: some instances for reinsurance now in the wake of these hurricanes, 539 00:31:22,400 --> 00:31:25,040 Speaker 4: they may be stable. People are not looking at increases. 540 00:31:25,400 --> 00:31:28,160 Speaker 4: The industry is looking at these losses. And that fifty 541 00:31:28,200 --> 00:31:31,160 Speaker 4: five billion Joe that you mentioned before, as you said, 542 00:31:31,240 --> 00:31:35,160 Speaker 4: is at the upper end. Moody's just lowered their estimate. 543 00:31:35,200 --> 00:31:39,280 Speaker 4: Moodies acquired a modeling firm called RMS recently and so 544 00:31:39,320 --> 00:31:41,880 Speaker 4: they have their own modeling of catastrophes, and they lower 545 00:31:41,920 --> 00:31:45,320 Speaker 4: their estimate from about forty five billion to about thirty 546 00:31:45,320 --> 00:31:49,800 Speaker 4: five billion. Another modeling source, Karen Clark, who's usually right 547 00:31:49,840 --> 00:31:52,040 Speaker 4: on the money, I think, is estimating thirty five thirty 548 00:31:52,080 --> 00:31:56,000 Speaker 4: six billion and Verisk, a publicly traded company that also 549 00:31:56,040 --> 00:31:58,720 Speaker 4: has its own modeling, is also landing in the thirty 550 00:31:58,720 --> 00:32:02,440 Speaker 4: five billion area. So this thirty five billion is going 551 00:32:02,520 --> 00:32:06,680 Speaker 4: to be borne by the national carriers, and by the 552 00:32:06,720 --> 00:32:11,280 Speaker 4: Florida domestics, and by the reinsurance companies in Lloyd's Bermuda 553 00:32:11,480 --> 00:32:14,600 Speaker 4: Continental Europe and the United States, and by the Florida 554 00:32:15,240 --> 00:32:20,000 Speaker 4: Hurricane Catastrophe Fund, and by private investors that are buying 555 00:32:20,000 --> 00:32:23,959 Speaker 4: catastrophe bonds those insurance linked securities. Some of them are 556 00:32:24,000 --> 00:32:26,320 Speaker 4: going to pay out, but it's not going to be 557 00:32:26,360 --> 00:32:29,720 Speaker 4: an exhaustion of the collateral that's in there. So the 558 00:32:29,760 --> 00:32:33,080 Speaker 4: industry is really breathing a sigh of relief that this 559 00:32:33,120 --> 00:32:36,200 Speaker 4: could have been the one that is not only an 560 00:32:36,280 --> 00:32:39,840 Speaker 4: earnings event, but a capital event that dents the capital 561 00:32:40,120 --> 00:32:43,520 Speaker 4: of an insurance company. And insurance companies typically like to 562 00:32:43,520 --> 00:32:47,680 Speaker 4: have fortress balance sheets because they're in existence to take 563 00:32:47,720 --> 00:32:49,520 Speaker 4: care of things, and even you know, what's the worst 564 00:32:49,520 --> 00:32:52,240 Speaker 4: that could possibly happen, they think about these things, they 565 00:32:52,360 --> 00:32:56,240 Speaker 4: model these things, so it's not a surprise that we 566 00:32:57,160 --> 00:33:00,840 Speaker 4: are able to withstand this as we clean up the mess. 567 00:33:01,040 --> 00:33:03,440 Speaker 3: I like that distinction between an earnings event for an 568 00:33:03,440 --> 00:33:06,560 Speaker 3: insurance company and a capital event, and it does sound 569 00:33:06,600 --> 00:33:09,400 Speaker 3: seems like an important Yeah, it does seem I have 570 00:33:09,440 --> 00:33:12,960 Speaker 3: one last random question going back to the When I 571 00:33:13,000 --> 00:33:17,240 Speaker 3: think of politics, I think of Republican candidates around the country, 572 00:33:17,280 --> 00:33:19,360 Speaker 3: and they like blamed the trial attorneys, and they like 573 00:33:19,480 --> 00:33:22,120 Speaker 3: to use the trial bar as one of their hobby 574 00:33:22,120 --> 00:33:26,240 Speaker 3: horses to fight against in Florida specifically. You know it's 575 00:33:26,240 --> 00:33:28,720 Speaker 3: a red state by and large. Is the trial bar 576 00:33:28,920 --> 00:33:31,160 Speaker 3: is the Is the lawyer industry a little bit more 577 00:33:31,240 --> 00:33:34,320 Speaker 3: savvy about being on both sides of this? Is this 578 00:33:34,400 --> 00:33:37,800 Speaker 3: a have they those lawyers a little bit savvy about 579 00:33:37,880 --> 00:33:41,480 Speaker 3: understanding that they need to kind of be on both teams. 580 00:33:42,600 --> 00:33:47,560 Speaker 4: In the days before Governor DeSantis signing rot reform into 581 00:33:47,600 --> 00:33:51,160 Speaker 4: law in Florida, in the few days before that, the 582 00:33:51,200 --> 00:33:55,160 Speaker 4: trial bar industry submitted one hundred and I think it 583 00:33:55,200 --> 00:33:58,400 Speaker 4: was one hundred and eighty thousand claims. So they got 584 00:33:58,400 --> 00:34:02,520 Speaker 4: things under the door before or the shop was closed. Wow, 585 00:34:02,600 --> 00:34:05,440 Speaker 4: got it so and they there was a letter that 586 00:34:05,560 --> 00:34:09,279 Speaker 4: was circulated among one of the major firms that had 587 00:34:09,400 --> 00:34:12,319 Speaker 4: Bellico's sort of terminology there, like you know, this is 588 00:34:12,360 --> 00:34:15,800 Speaker 4: a war. You know, you can't be friendly to the defense. 589 00:34:16,080 --> 00:34:19,160 Speaker 4: They are the enemy. So I don't think people are 590 00:34:19,400 --> 00:34:23,720 Speaker 4: holding hands and singing Kumbaya and a gathering of defense 591 00:34:23,760 --> 00:34:24,720 Speaker 4: and planning council. 592 00:34:25,239 --> 00:34:28,799 Speaker 1: So summing up this whole conversation, you know, people talk 593 00:34:28,880 --> 00:34:32,319 Speaker 1: about what needs to happen in Florida to make it 594 00:34:32,600 --> 00:34:36,440 Speaker 1: a viable place or an affordable place to live. This 595 00:34:36,520 --> 00:34:38,400 Speaker 1: is kind of a loaded subject. But there are plenty 596 00:34:38,400 --> 00:34:40,279 Speaker 1: of people out there who say, well, maybe we just 597 00:34:40,280 --> 00:34:43,399 Speaker 1: don't build houses on the coast of Florida anymore. I'm 598 00:34:43,440 --> 00:34:46,400 Speaker 1: sure a lot of Floridians probably have strong opinions about that. 599 00:34:46,880 --> 00:34:50,360 Speaker 1: But what else could be done? I guess to make 600 00:34:50,840 --> 00:34:55,000 Speaker 1: the state more resilient and to make insurance more affordable 601 00:34:55,080 --> 00:34:56,279 Speaker 1: for the people who are there. 602 00:34:56,840 --> 00:35:01,360 Speaker 4: The codes are really important, really important. There was a house, well, 603 00:35:01,360 --> 00:35:03,960 Speaker 4: it wasn't in Florida, but this is a good illustration. 604 00:35:04,000 --> 00:35:06,600 Speaker 4: There was a house in Mississippi that was worth sixty 605 00:35:06,680 --> 00:35:10,520 Speaker 4: nine thousand dollars and it flooded thirty four times in 606 00:35:10,640 --> 00:35:14,400 Speaker 4: thirty two years. Wow. Because the owner knew that the NFIP, 607 00:35:14,560 --> 00:35:16,960 Speaker 4: the flood in National Food Insurance Program would pay out. 608 00:35:17,160 --> 00:35:19,520 Speaker 4: So it was about seven hundred thousand dollars paid out. 609 00:35:20,200 --> 00:35:24,560 Speaker 4: There have been removals of homes that makes sense, like 610 00:35:24,600 --> 00:35:28,200 Speaker 4: it happens in Queens in southern New York City where 611 00:35:28,239 --> 00:35:31,880 Speaker 4: you had the houses in Breezy Point that were elevated, 612 00:35:32,080 --> 00:35:35,000 Speaker 4: so economically, sometimes it doesn't make sense to do that. 613 00:35:35,520 --> 00:35:38,319 Speaker 4: If you've ever met anyone that's been to Bermuda, will 614 00:35:38,320 --> 00:35:41,360 Speaker 4: see that the roofs there, they're all the same across 615 00:35:41,400 --> 00:35:45,320 Speaker 4: the entire island. Well, they're made of limestone. So Bermuda, 616 00:35:45,320 --> 00:35:47,239 Speaker 4: which is in the middle of the Atlantic, gets these 617 00:35:47,280 --> 00:35:51,120 Speaker 4: storms and it's a mandatory thing in Bermuda and the 618 00:35:51,160 --> 00:35:54,240 Speaker 4: building code to have this kind of a limestone roof, 619 00:35:54,600 --> 00:35:56,960 Speaker 4: not only because it protects the house from being destroyed. 620 00:35:56,960 --> 00:35:58,920 Speaker 4: Some roofs have been there for two hundred years, but 621 00:35:58,960 --> 00:36:01,759 Speaker 4: also because it collect the rain water. Bermuda is a 622 00:36:01,760 --> 00:36:05,839 Speaker 4: pretty dry island, so you have this strict code. So yeah, 623 00:36:05,880 --> 00:36:12,319 Speaker 4: removals work. About one percent of NFIP policies are responsible 624 00:36:12,400 --> 00:36:15,239 Speaker 4: for thirty percent of the losses because you have these 625 00:36:15,280 --> 00:36:18,960 Speaker 4: repetitive loss properties like the one I mentioned in Mississippi, 626 00:36:19,320 --> 00:36:21,120 Speaker 4: and there's the story of a house in Houston that 627 00:36:21,280 --> 00:36:24,759 Speaker 4: was rebuilt eight times instead of removing it somewhere else. 628 00:36:24,960 --> 00:36:27,440 Speaker 4: So price sends a signal. If you look at classical 629 00:36:27,440 --> 00:36:31,360 Speaker 4: liberal economics, price is a signal, and if the price 630 00:36:31,560 --> 00:36:33,680 Speaker 4: goes up, then it tells you that it's something going 631 00:36:33,719 --> 00:36:36,920 Speaker 4: on here, why is it more expensive? So these sending 632 00:36:36,920 --> 00:36:40,400 Speaker 4: the right signal is something that these public programs like 633 00:36:40,480 --> 00:36:43,600 Speaker 4: the National Flood Insurance Program or crop insurance, which is 634 00:36:43,600 --> 00:36:46,839 Speaker 4: a whole other thing, don't send the right signals. They 635 00:36:46,920 --> 00:36:51,600 Speaker 4: encourage people to have behavior which is not economically appropriate. 636 00:36:51,600 --> 00:36:55,200 Speaker 4: They're passing on socializing the risk to ordinary taxpayers. Tracy 637 00:36:55,239 --> 00:36:57,040 Speaker 4: and Joel, like you and me, I don't want. 638 00:36:56,960 --> 00:36:59,480 Speaker 3: To pay that think you know the only person I 639 00:36:59,520 --> 00:37:01,400 Speaker 3: know who's spent a lot of time in Bermuda, by 640 00:37:01,400 --> 00:37:02,880 Speaker 3: the way, as an insurance. 641 00:37:02,480 --> 00:37:05,000 Speaker 1: Executive and are our owner. 642 00:37:05,120 --> 00:37:06,239 Speaker 3: Oh that's right, that's right. 643 00:37:06,719 --> 00:37:09,840 Speaker 1: Okay, Jerry, thank you so much for coming on the 644 00:37:09,880 --> 00:37:14,040 Speaker 1: show and explaining the latest in Florida insurance and roof 645 00:37:14,239 --> 00:37:15,439 Speaker 1: frauds to us as well. 646 00:37:16,120 --> 00:37:17,800 Speaker 4: Thank you very much. It's been a pleasure. 647 00:37:31,040 --> 00:37:34,799 Speaker 1: Joe. That was really interesting, especially the contrast between Florida and. 648 00:37:34,880 --> 00:37:38,040 Speaker 3: Yeah, no, that does some really interesting you know, a 649 00:37:38,200 --> 00:37:41,279 Speaker 3: natural experiment out in the wild, So someone jump on that. 650 00:37:41,680 --> 00:37:46,040 Speaker 1: Yeah, maybe we should say someone who's not us please 651 00:37:46,080 --> 00:37:48,960 Speaker 1: look into this. No, that's bad. I mean, there are 652 00:37:48,960 --> 00:37:51,640 Speaker 1: so many things about Florida, and to some extent it's 653 00:37:51,719 --> 00:37:55,840 Speaker 1: kind of it feels like in the discourse often people 654 00:37:55,880 --> 00:38:00,960 Speaker 1: don't like separate its natural propensity to have hurricanes and 655 00:38:01,080 --> 00:38:04,759 Speaker 1: storms from the structure of the market. So it was 656 00:38:04,960 --> 00:38:07,560 Speaker 1: kind of good to kind of zero in a little 657 00:38:07,560 --> 00:38:09,719 Speaker 1: bit more on structural issues totally. 658 00:38:09,880 --> 00:38:14,759 Speaker 3: And to his point, Florida's history is a history of 659 00:38:15,160 --> 00:38:18,360 Speaker 3: real estate bubbles and busts and storms, and there have 660 00:38:18,400 --> 00:38:21,239 Speaker 3: been many cycles of them, and it really, you know, 661 00:38:21,400 --> 00:38:24,279 Speaker 3: dates back to at least the nineteen twenties. I mean, 662 00:38:24,400 --> 00:38:28,600 Speaker 3: the history of Florida is essentially the history of air conditioning. 663 00:38:29,000 --> 00:38:32,880 Speaker 3: And once air conditioning kind of existed, there is always 664 00:38:32,920 --> 00:38:35,520 Speaker 3: going to be this mass of people from the other 665 00:38:35,680 --> 00:38:38,440 Speaker 3: forty seven mainland states or maybe forty eight states or 666 00:38:38,440 --> 00:38:41,799 Speaker 3: whatever that will want to go there to live in 667 00:38:41,840 --> 00:38:44,640 Speaker 3: a warm place by the ocean where they have air 668 00:38:44,680 --> 00:38:47,120 Speaker 3: conditioning on demand. And Florida has been counted out so 669 00:38:47,200 --> 00:38:49,080 Speaker 3: many times in the past. And I'm just going to 670 00:38:49,120 --> 00:38:51,799 Speaker 3: say something further, which is that every time we talk 671 00:38:51,840 --> 00:38:55,360 Speaker 3: about one of these extreme weather states, whether it's Florida 672 00:38:55,920 --> 00:38:57,560 Speaker 3: or Arizona with the heage. 673 00:38:57,360 --> 00:38:58,160 Speaker 1: In North Carolina. 674 00:38:58,360 --> 00:39:01,160 Speaker 3: Yeah, and there's this sort of like a version that 675 00:39:01,200 --> 00:39:04,319 Speaker 3: people have towards the even process of moving there, like 676 00:39:04,560 --> 00:39:07,319 Speaker 3: this is humans weren't meant to live in this land. 677 00:39:07,400 --> 00:39:09,960 Speaker 3: And I'm just going to say right here, no, what 678 00:39:10,120 --> 00:39:13,120 Speaker 3: humans do that other animals don't is we make land 679 00:39:13,200 --> 00:39:17,160 Speaker 3: habitable that we aren't naturally acclimated. That is what makes 680 00:39:17,239 --> 00:39:19,760 Speaker 3: us different from all the other animals. Is we find 681 00:39:19,880 --> 00:39:23,520 Speaker 3: land that normally we couldn't survive in under normal conditions, 682 00:39:23,520 --> 00:39:25,279 Speaker 3: and we turn it into something we can live in, 683 00:39:25,320 --> 00:39:27,640 Speaker 3: and it will always be going to the most extreme 684 00:39:27,680 --> 00:39:29,399 Speaker 3: parts of the world for that land. 685 00:39:29,520 --> 00:39:31,200 Speaker 1: Yeah, But the question is how much does that end 686 00:39:31,239 --> 00:39:35,239 Speaker 1: up costing? Right Like this is like much time in 687 00:39:35,280 --> 00:39:38,000 Speaker 1: like mangrove forests without telling me you haven't spent much 688 00:39:38,000 --> 00:39:40,840 Speaker 1: time in mangrove forest, Like it costs a lot of money. 689 00:39:40,680 --> 00:39:44,080 Speaker 1: And there's like an environmental debate about whether we should 690 00:39:44,120 --> 00:39:44,880 Speaker 1: be sure. 691 00:39:44,640 --> 00:39:48,640 Speaker 3: But sure, and I get that, and there are certainly costs. 692 00:39:48,719 --> 00:39:51,000 Speaker 3: But you know, there's a lot of people in the 693 00:39:51,040 --> 00:39:54,080 Speaker 3: world right now who can live kind of near a 694 00:39:54,120 --> 00:39:56,680 Speaker 3: beach in an ocean in Florida. People who might have 695 00:39:56,760 --> 00:39:59,720 Speaker 3: probably been who consider middle class, who can have something 696 00:40:00,120 --> 00:40:02,600 Speaker 3: that might have been reserved for the alter elite many 697 00:40:02,640 --> 00:40:04,560 Speaker 3: times ago. And that is sort of progress. 698 00:40:04,719 --> 00:40:07,239 Speaker 1: Okay. I mean, look, I get well, I get that 699 00:40:07,239 --> 00:40:10,000 Speaker 1: people want to live on the beach, Like that's basically 700 00:40:10,000 --> 00:40:12,240 Speaker 1: what you're saying. I think there's still an open question 701 00:40:12,280 --> 00:40:15,799 Speaker 1: about how that how desirable that is from a social perspective. 702 00:40:17,320 --> 00:40:21,040 Speaker 3: Yeah, well, other people, I'm not you know, I'm just saying, yes, sure, 703 00:40:21,480 --> 00:40:25,960 Speaker 3: I get that, I get that in and I'll say 704 00:40:25,960 --> 00:40:30,000 Speaker 3: this too, is someone who I believe there are issues 705 00:40:30,040 --> 00:40:33,120 Speaker 3: with the flood insurance aspects specifically in which people who 706 00:40:33,160 --> 00:40:35,080 Speaker 3: don't get to live on the beach or people who 707 00:40:35,080 --> 00:40:40,520 Speaker 3: aren't living in asphalt laden areas are subsidizing the existence 708 00:40:40,520 --> 00:40:42,920 Speaker 3: of people who do live near the beach on asphalt 709 00:40:43,000 --> 00:40:46,640 Speaker 3: laden areas. There are issues there, and I feel like 710 00:40:46,800 --> 00:40:50,640 Speaker 3: maybe the flood insurance system specifically probably needs some sort 711 00:40:50,640 --> 00:40:53,879 Speaker 3: of better correlation between who benefits from it and who 712 00:40:53,920 --> 00:40:56,040 Speaker 3: pays it. But I'm not an expert, but that would 713 00:40:56,080 --> 00:40:59,879 Speaker 3: be my intuition. Nonetheless, I am confident that over time, 714 00:41:00,200 --> 00:41:02,839 Speaker 3: the march of people towards warm weather, water and air 715 00:41:02,880 --> 00:41:04,239 Speaker 3: conditioning we'll continue and we'll. 716 00:41:04,160 --> 00:41:06,799 Speaker 1: Find a way. Okay, let's leave it there, because after 717 00:41:06,880 --> 00:41:08,520 Speaker 1: this episode, Joe and I are going to go off 718 00:41:08,520 --> 00:41:11,839 Speaker 1: and argue in private over whether or not Florida beach 719 00:41:11,880 --> 00:41:14,920 Speaker 1: homes are the height of human progress. All right, this 720 00:41:15,000 --> 00:41:18,560 Speaker 1: has been another episode of the Audlots podcast. I'm Tracy Alloway. 721 00:41:18,640 --> 00:41:20,839 Speaker 1: You can follow me at Tracy Alloway and. 722 00:41:20,760 --> 00:41:23,400 Speaker 3: I'm Jill Wisenthal. You can follow me at the Stalwart. 723 00:41:23,600 --> 00:41:27,440 Speaker 3: Follow our producers Carmen Rodriguez at Carmen erman Dashel Bennett 724 00:41:27,440 --> 00:41:30,520 Speaker 3: at Dashbot and Kilbrooks at Kilbrooks. Thank you to our 725 00:41:30,560 --> 00:41:34,040 Speaker 3: producer Moses onm For our Oddlots content. Go to Bloomberg 726 00:41:34,040 --> 00:41:36,760 Speaker 3: dot com slash odd Lots, where we have transcripts, blog 727 00:41:36,880 --> 00:41:40,360 Speaker 3: and a newsletter and you can chat with fellow listeners 728 00:41:40,440 --> 00:41:42,399 Speaker 3: about all this stuff that we talk about in our 729 00:41:42,440 --> 00:41:45,080 Speaker 3: discord discord gg slash odlogs. 730 00:41:45,320 --> 00:41:47,799 Speaker 1: And if you enjoy alllots, if you like it when 731 00:41:47,840 --> 00:41:50,759 Speaker 1: we talk about Florida insurance markets, then please leave us 732 00:41:50,800 --> 00:41:54,560 Speaker 1: a positive review on your favorite podcast platform. And remember, 733 00:41:54,640 --> 00:41:57,319 Speaker 1: if you are a Bloomberg dot com subscriber, you can 734 00:41:57,360 --> 00:42:00,600 Speaker 1: listen to all of our episodes. Absolutely add free. You'll 735 00:42:00,640 --> 00:42:04,200 Speaker 1: also get our new daily newsletter. 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