WEBVTT - Russian Tech Is Leaking Into North Korea, Atlantic Council's Cohen Says 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg P and L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.520 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg P M L 0:00:20.840 --> 0:00:32.040 Podcast on Apple Podcasts, SoundCloud and Bloomberg dot Com. Well, 0:00:32.240 --> 0:00:36.479 our Russian President Vladimir Putin has been condemning North Korea's 0:00:36.520 --> 0:00:39.760 ongoing nuclear and missile program. He describes the tests as 0:00:39.800 --> 0:00:43.440 a flagrant violation of u N rules, but he does 0:00:43.520 --> 0:00:47.800 say that resolving the crisis is impossible without fresh talks. 0:00:47.840 --> 0:00:50.559 Here to tell us more is Ariel Cohen. He is 0:00:50.600 --> 0:00:53.800 a Senior Fellow at the Atlantic Council and director of 0:00:53.880 --> 0:00:57.959 the Center for Energy and Natural Resources and Geopolitics at 0:00:57.960 --> 0:01:00.640 the I A g. S. And he joined us on 0:01:00.680 --> 0:01:03.160 the phone. Ariel, thank you very much for being with us. 0:01:03.160 --> 0:01:06.120 What do you make of President Vadomir Putin's comments and 0:01:06.200 --> 0:01:11.720 also his conference with the joint news conference with the 0:01:11.760 --> 0:01:17.720 South Korean leader mun Ja In the best case scenario, 0:01:17.880 --> 0:01:22.640 puting is trying to elbow himself into a negotiating position 0:01:23.280 --> 0:01:25.840 and be a mediator. But I'm looking at the worst 0:01:25.840 --> 0:01:30.759 case scenario in which Russia is trying to replace China 0:01:30.959 --> 0:01:35.039 as the great power sponsor of North Korea. Uh. The 0:01:35.319 --> 0:01:41.680 remarks were unprecedented because Kim Jong un is breaking decades 0:01:41.800 --> 0:01:45.679 long policy of non proliferation that the Soviet Union and 0:01:45.680 --> 0:01:49.920 then Russia, China and the five permanent members of the 0:01:50.000 --> 0:01:53.520 United Nations, including the United States, we're always supporting. We 0:01:53.520 --> 0:01:59.800 were always against proliferating nuclear weapons to new actors, be 0:02:00.040 --> 0:02:03.920 at Pakistan or Iran or North Korea. And what we 0:02:04.000 --> 0:02:07.360 see now is the sea change in which Russia is 0:02:07.480 --> 0:02:13.640 effectively supporting Kim Jong saying, no sanctions, no military action. 0:02:13.919 --> 0:02:17.720 So what are we supposed to do? Uh to kiss him? 0:02:17.800 --> 0:02:21.600 So uh, this is bad news. And also I'm looking 0:02:21.680 --> 0:02:28.960 how the North Korean missile nuclear weapons um and UH 0:02:29.280 --> 0:02:33.679 miniaturization of warheads capacities are going up. And I suspect 0:02:33.680 --> 0:02:36.040 I don't have a proof. I don't have access to 0:02:36.080 --> 0:02:40.119 classified materials or intercepts of the emails or phone calls, 0:02:40.160 --> 0:02:44.239 but I suspect maybe, just maybe Russian technology is leaking 0:02:44.320 --> 0:02:47.839 into North Korea as we speak. Well, maybe you could 0:02:47.880 --> 0:02:49.880 give us the context for us because this would not 0:02:49.919 --> 0:02:53.400 be the first time that Russia or in previous guys 0:02:53.440 --> 0:02:58.680 is the Soviet Union was a supporter of North Korea. Absolutely, 0:02:59.280 --> 0:03:06.359 the grandfather other Um of the current leader Kim Uh 0:03:06.960 --> 0:03:10.119 Kim ill songs Uh he said, I believe he even 0:03:10.120 --> 0:03:12.880 saw himself maybe as a as a competitor or as 0:03:12.919 --> 0:03:17.840 a challenger to the mantle of of leader to Maltzi tongue. 0:03:17.960 --> 0:03:21.400 At the time, well, he was of course a much 0:03:21.800 --> 0:03:25.640 smaller player, but he was indeed an asset of the 0:03:25.680 --> 0:03:29.080 Russian of the Soviet military. He served in the Soviet 0:03:29.160 --> 0:03:32.920 military as they rolled Uh into Korea during the war 0:03:32.960 --> 0:03:38.640 with Japan. Uh and Uh he indeed was very He 0:03:38.720 --> 0:03:42.440 was a Stalinist. He he was the product of that era, 0:03:43.000 --> 0:03:46.200 a totalitary and leader. What's fascinating with North Korea. North 0:03:46.280 --> 0:03:50.800 Korea is probably the only Uh Stalinist dictatorship left on 0:03:50.880 --> 0:03:58.600 the planet. With his parades and with absolute political reporting, 0:03:59.000 --> 0:04:02.720 when people are ratting each other out to the authorities, 0:04:03.120 --> 0:04:08.480 Uh so Um. With time, they started to push away 0:04:09.360 --> 0:04:13.680 his son Uh pushed away both the Russian faction and 0:04:13.760 --> 0:04:18.960 the Chinese faction eventually, and now the grandson Um Uh 0:04:19.600 --> 0:04:22.480 is of course cracking down on the pro Chinese and 0:04:22.520 --> 0:04:25.080 even killing some of the members of his family who 0:04:25.080 --> 0:04:28.840 are pro China. So the relationship with China is complicated. 0:04:29.080 --> 0:04:32.440 But nevertheless, both China and Russia are using North Korea 0:04:32.760 --> 0:04:35.719 as a battering ramp against the United States and our 0:04:35.839 --> 0:04:40.280 interests in the Pacific, as well as against our allies, uh, 0:04:40.400 --> 0:04:44.159 the Japanese and the South Koreas. So can you lay 0:04:44.200 --> 0:04:48.200 out a scenario in which there is some resolution that 0:04:48.360 --> 0:04:53.360 is peaceful. Well in the ideal world, uh and uh 0:04:53.560 --> 0:04:57.440 this this looks less and less realistic in the ideal world. 0:04:57.480 --> 0:05:01.800 The great hours, the US, China, and Russia. We'll say, 0:05:01.839 --> 0:05:06.599 we don't need a malignant proliferator. We know about the 0:05:06.680 --> 0:05:12.599 ties between North Korea and Iran. UM. Most probably Iranians 0:05:12.600 --> 0:05:16.160 have more money from oil sales. They give the money 0:05:16.200 --> 0:05:22.520 to Kim. Kim also proliferated nuclear uh weapons technology to Syria. 0:05:22.560 --> 0:05:25.719 You remember in two thousand and uh seven, I believe 0:05:25.760 --> 0:05:29.320 we're two thousand and six, the Israelis in a night 0:05:29.560 --> 0:05:34.600 strike destroyed uh a plutonium reactor in Syria, a reactor 0:05:34.680 --> 0:05:39.280 that was based on North Korean technology. Uh. So Uh, 0:05:39.440 --> 0:05:43.600 they are a malignant proliferator and great powers if they 0:05:43.640 --> 0:05:47.880 were responsible, if they behaved as adults would get together 0:05:48.400 --> 0:05:54.520 and squelch uh. That's regime's ability to produce nuclear weapons 0:05:54.600 --> 0:05:58.360 and the means to deliver ballistic missiles. Now we are, 0:05:58.440 --> 0:06:01.640 I think on the cost of the whole new ball 0:06:01.680 --> 0:06:04.920 game in which we may be hit with a nuclear 0:06:04.960 --> 0:06:10.240 weapon from North Korea realistic possibility. I hope as we 0:06:10.400 --> 0:06:13.440 as we all do, we hope this doesn't does not happen. 0:06:13.560 --> 0:06:15.400 I want to thank you Ariel Cohen. He is a 0:06:15.400 --> 0:06:18.680 Senior Fellow at the Atlantic Council, Director of the Center 0:06:18.720 --> 0:06:36.479 for Energy, Natural Resources in Geopolitics. Hurricane Irma has damaged 0:06:36.520 --> 0:06:40.599 buildings and infrastructure in the Eastern Caribbean, packing winds of 0:06:40.600 --> 0:06:44.080 a hundred and eighty five miles per hour. The storm 0:06:44.080 --> 0:06:49.840 made landfall in bar Buddha around who a m. This morning. 0:06:50.000 --> 0:06:54.159 And here to help us understand what's next is Shenando Bassu, 0:06:54.320 --> 0:06:59.440 meteorologist and guess analyst for Bloomberg New Energy Finance. Shenando 0:06:59.440 --> 0:07:02.520 always al asure. Thanks for joining me. Tell us the 0:07:02.640 --> 0:07:06.359 latest on the Hurricane Irma, Hey him, Yeah, great to 0:07:06.400 --> 0:07:10.480 be here. So IRMA very powerful storm right now today. 0:07:10.640 --> 0:07:14.080 As of the advisory put out by the National Hurricane 0:07:14.080 --> 0:07:17.640 Center this morning. The track has actually shifted just a 0:07:17.680 --> 0:07:20.840 little far east, so as it heads up right now, um, 0:07:20.880 --> 0:07:24.400 it's actually heading about you know, northwest, and then once 0:07:24.440 --> 0:07:26.800 it reaches just north of Hispaniola, it's going to be 0:07:26.840 --> 0:07:30.520 making the right turn as we can see on the 0:07:30.600 --> 0:07:32.880 you know, the projected track here, and it'll be grazing 0:07:32.960 --> 0:07:35.400 you know, the east coast of Florida, but of course 0:07:35.520 --> 0:07:40.600 impacting the entire state. The warnings that have gone out 0:07:40.680 --> 0:07:45.400 for this Category five storm are in Puerto Rico, as 0:07:45.440 --> 0:07:49.000 well as the islands of St. Kitts, Nevas, the Virgin Islands, 0:07:49.240 --> 0:07:53.640 and as you said, Hispaniola, Dominican Republican Haiti, Cuba also 0:07:53.720 --> 0:07:58.560 being threatened. Has has there been any update on whether 0:07:58.680 --> 0:08:02.520 this storm is still going to cause widespread destruction in 0:08:02.560 --> 0:08:06.480 those places? It certainly is, you know, very very high winds. 0:08:06.520 --> 0:08:08.600 We have winds in excess of a hundred and seventy 0:08:08.600 --> 0:08:12.560 miles per hour with an incredible storm surge. We expect 0:08:12.600 --> 0:08:17.040 the hurricane itself to strengthen for at least another forty 0:08:17.040 --> 0:08:21.240 eight hours, or strengthen or rather keep its current um 0:08:21.280 --> 0:08:24.080 its current energy going, and then by the time we 0:08:24.120 --> 0:08:26.920 get to a Friday or Saturday. That's when we'll maybe 0:08:27.000 --> 0:08:30.880 start to see a slight decline in its in its power, 0:08:31.080 --> 0:08:34.800 and then it'll probably get downgraded to a Category three 0:08:34.960 --> 0:08:38.280 or four just before making landfall. Well, there's a report that, 0:08:38.320 --> 0:08:41.360 for example, roofs roofs were ripped off buildings and homes 0:08:41.360 --> 0:08:44.400 were flooded on the islands of Saint Bartholomy and Saint 0:08:44.440 --> 0:08:49.720 Martin the eye of the storm passed overhead. Is there 0:08:49.720 --> 0:08:52.720 going to be any lingering effects in terms, let's start 0:08:52.760 --> 0:08:56.360 with transport, and I'm thinking of oil that needs to 0:08:56.440 --> 0:09:00.839 come out of Venezuela and be refined. Yes, So there 0:09:00.880 --> 0:09:03.600 are a few numbers of the number of refineries that 0:09:03.640 --> 0:09:07.239 are in the way. Certainly those are on the islands 0:09:07.559 --> 0:09:10.400 um that you mentioned previously, and also a couple in 0:09:10.640 --> 0:09:14.320 the d R and Haiti, and so any ships that 0:09:14.360 --> 0:09:16.839 are trying to make their way over there certainly not 0:09:16.920 --> 0:09:20.360 going to be able to UM in the coming days. Now, 0:09:20.400 --> 0:09:24.040 as far as the actual assets are conversed concern the refineries, 0:09:24.600 --> 0:09:29.360 those may definitely be out of service until further recovery 0:09:29.400 --> 0:09:32.760 efforts can be put into place. And in many places, 0:09:32.800 --> 0:09:36.840 of course, electricity is out and the infrastructure has been destroyed. 0:09:36.880 --> 0:09:40.120 That's going to take time to rebuild it certainly is. Yes, 0:09:40.800 --> 0:09:44.720 the effects perhaps in the United States because of this 0:09:44.840 --> 0:09:48.640 eastward turn, what will it mean just large amounts of 0:09:48.760 --> 0:09:51.679 rain and wind? Or will it I mean, are we 0:09:51.720 --> 0:09:55.320 still bracing for a hurricane to hit the Florida coast. Yes, 0:09:55.400 --> 0:09:57.520 it's going to you know, it's a major hurricane at 0:09:57.520 --> 0:09:59.240 the end of the day. And yes, that does mean 0:09:59.280 --> 0:10:03.560 a lot of rain, certainly, you know, twenty in parts 0:10:03.679 --> 0:10:06.680 at least, if not more, with very very high winds 0:10:06.720 --> 0:10:10.760 along there along the coast. Because of the trajectory of 0:10:10.880 --> 0:10:14.240 Irma right now, Hurricane Irma, we could see effects as 0:10:14.280 --> 0:10:17.840 far north as the Carolinas into next week, and that's 0:10:17.880 --> 0:10:20.959 something of course that will have to keep an eye 0:10:21.000 --> 0:10:24.680 on as the storm progresses. Will there be any effects 0:10:24.720 --> 0:10:27.160 you think in the Gulf of Mexico as a result 0:10:27.200 --> 0:10:33.079 of Irma? Well, currently, any ship traffic and tanker traffic 0:10:33.200 --> 0:10:37.040 that's out there may very well be affected. Of course, 0:10:37.080 --> 0:10:40.240 this is a very large storm. It covers a very 0:10:40.400 --> 0:10:44.040 large area, and so as a result, we can definitely 0:10:44.120 --> 0:10:46.760 expect some maritime effects in the eastern half of the 0:10:46.800 --> 0:10:50.200 Gulf of Mexico. For sure. Is that unusual that the 0:10:50.360 --> 0:10:53.120 size of the storm, not necessarily the ferocity, but but 0:10:53.160 --> 0:10:57.800 the actual size. The size is not so unusual. I mean, 0:10:57.840 --> 0:11:01.720 we've certainly seen hurricanes that are very large in the 0:11:01.800 --> 0:11:05.000 recent past. UM. But the intensity, of course, as we know, 0:11:05.160 --> 0:11:09.240 this is the most powerful Atlantic hurricane in history, which 0:11:09.320 --> 0:11:13.240 is incredible in of itself. Well, I know also that 0:11:13.800 --> 0:11:16.800 there have been efforts already underway. I mean the President 0:11:16.880 --> 0:11:21.120 has UH already declared a disaster area in order to 0:11:21.600 --> 0:11:26.640 facilitate the emergency evacuation. And Governor Rick Scott said that 0:11:26.679 --> 0:11:29.880 the storm surge could cover your house. We can rebuild buildings, 0:11:29.920 --> 0:11:33.400 but can't rebuild your family. Uh. And he has put 0:11:33.400 --> 0:11:38.120 out an evacuation order. Yes, and I'm glad he has. UH. 0:11:38.160 --> 0:11:41.040 This is going to cause a lot of damage along 0:11:41.080 --> 0:11:46.000 the coast. The storm surge, especially UM puts human lives 0:11:46.000 --> 0:11:48.320 at risk, and so I think this is the right 0:11:48.360 --> 0:11:51.960 thing to do. Well. Uh. Indeed, for example, the season 0:11:52.000 --> 0:11:56.520 opener of the NFL Miami Dolphins Tampa Bay Buccaneers that's 0:11:56.559 --> 0:11:59.880 been postponed because of IRMA, it will be played in 0:12:00.000 --> 0:12:04.960 Miami on November. Then there are we were speaking earlier 0:12:04.960 --> 0:12:07.560 and there are many insurance claims that are going to 0:12:07.640 --> 0:12:11.400 be filed as part of this. What about the industrial 0:12:11.840 --> 0:12:15.680 insurance aspect, you know, the refineries, the ships, all of 0:12:15.679 --> 0:12:19.680 that infrastructure that's got to have commercial insurance. Now, yeah, 0:12:19.760 --> 0:12:23.760 there's definitely going to be commercial impacts. I can't speak 0:12:23.800 --> 0:12:28.600 too much to the insurance side of UM and you 0:12:28.600 --> 0:12:33.079 know that's side of this whole lot, but something we 0:12:33.120 --> 0:12:35.520 should look out well. And in fact, the governor of 0:12:35.520 --> 0:12:39.080 Puerto Rico, Ricardo Rosello, he declared a state of emergency 0:12:39.080 --> 0:12:43.400 and has also activated the National Guard. What about getting 0:12:43.440 --> 0:12:47.200 supplies to people that need them? Is that going to 0:12:47.280 --> 0:12:49.720 be affected by I mean it must be affected by 0:12:49.760 --> 0:12:51.520 the lack of transport. I mean you're not going to 0:12:51.600 --> 0:12:55.200 be able to get water, plywood, batteries and generators, uh, 0:12:55.240 --> 0:12:58.560 if you can't actually physically get it there, right, So, 0:12:59.000 --> 0:13:01.560 as far as proper sans go, they will have to 0:13:01.640 --> 0:13:05.120 be UM. I think, you know, at this point, we're 0:13:05.240 --> 0:13:08.680 we're kind of beyond the time UM that we can 0:13:08.679 --> 0:13:11.760 get things in or out of those areas. So most 0:13:11.800 --> 0:13:14.559 likely we'll have to wait till after the storm passes 0:13:14.600 --> 0:13:17.720 to you know, fly planes in or even UM barges 0:13:17.800 --> 0:13:20.560 or ships that can carry those kinds of goods. Now, 0:13:20.640 --> 0:13:22.960 know what, what have you? Just maybe just give us 0:13:22.960 --> 0:13:25.240 an update of what you've heard, for example, of the 0:13:25.240 --> 0:13:29.720 rebuilding or vamping efforts as a result the Hurricane Harvey 0:13:29.800 --> 0:13:31.240 in the in the Gulf, because I know that was 0:13:31.640 --> 0:13:34.679 that was just the last hurricane. Yeah, yeah, and uh, 0:13:35.040 --> 0:13:38.280 this is the second major hurricane in a row that 0:13:38.400 --> 0:13:41.800 will be making landfall here in the US. Harvey's impacts, 0:13:41.880 --> 0:13:44.680 of course, are still ongoing. I mean, the rebuilding is 0:13:44.720 --> 0:13:49.240 just barely getting started, you know along the coast of Texas. UM, 0:13:49.320 --> 0:13:53.400 the commercial side of things still still feeling those impacts 0:13:53.440 --> 0:13:57.400 as well. I mentioned previously that we had you know, 0:13:57.600 --> 0:14:01.600 gasolene tankers, UM that we're not able to get to 0:14:01.679 --> 0:14:05.600 Florida and you know delivery gatholene. And now as people 0:14:05.600 --> 0:14:09.840 are evacuating, UM, there's definitely some tightness in the supply 0:14:09.960 --> 0:14:13.360 market over there as a result of that. Right, all right, Well, 0:14:13.400 --> 0:14:17.360 thank you very much. Shnandobasu is our meteorologist guess analyst 0:14:17.400 --> 0:14:34.320 for Bloomberg New Energy Finance talking about the hurricane Irma. Well, 0:14:34.520 --> 0:14:37.680 Hurricane Harvey's cost to the victims in the path and 0:14:37.760 --> 0:14:42.160 two taxpayers is still being calculated. Indeed, the governor of 0:14:42.200 --> 0:14:45.440 the state of Texas, Greg Abbott, he said that Texas 0:14:45.440 --> 0:14:47.480 could need more than a hundred and twenty five billion 0:14:47.520 --> 0:14:50.600 dollars from the US government. Well, what role will the 0:14:50.640 --> 0:14:54.120 insurance industry play in this? Jonathan Adams is our senior 0:14:54.280 --> 0:14:59.280 industry executive analyst for insurance. He's for Bloomberg Intelligence and 0:14:59.320 --> 0:15:02.080 he joins US. Now, you know, Jonathan, I'm trying to understand. 0:15:02.200 --> 0:15:04.320 There are so many different types of insurance, and one 0:15:04.400 --> 0:15:08.080 of the things I read recently is that the Consumer 0:15:08.120 --> 0:15:11.480 Federation of America said that only twenty of the people 0:15:11.680 --> 0:15:15.840 in Texas who are affected by Hurricane Harvey have insurance. 0:15:16.400 --> 0:15:19.960 And then when I look at the details, it says 0:15:20.040 --> 0:15:25.640 private property insurance policies normally do not cover flooding. So 0:15:25.680 --> 0:15:28.480 I'm wondering, tell us the sort of disposition of who 0:15:28.520 --> 0:15:32.200 has insurance and who's on the hook for it. Sure, 0:15:32.320 --> 0:15:35.240 I'd be happy to do that. So, UM, in terms 0:15:35.240 --> 0:15:40.000 of consumers, You're exactly right. The number that UM purchase 0:15:40.040 --> 0:15:45.120 insurance independent of their normal homeowners policy is a relatively 0:15:45.200 --> 0:15:48.920 small percentage. UM having said that most of those that 0:15:48.960 --> 0:15:51.680 do are the ones that are located in floodplains, and 0:15:51.720 --> 0:15:56.800 they will UM receive some support from the National Flood 0:15:56.840 --> 0:16:02.800 Insurance Program. So UM that federally run program will UH 0:16:03.200 --> 0:16:06.160 step in and be paying a large portion of the 0:16:06.200 --> 0:16:11.600 total in short loss for UH individual homeowners, for UM 0:16:11.760 --> 0:16:15.840 commercial enterprises, and for other types of losses. For example, 0:16:15.840 --> 0:16:19.400 there were half a million vehicles at least that have 0:16:19.560 --> 0:16:23.960 been estimated to have been damaged in this storm. UM 0:16:24.080 --> 0:16:28.480 ordinary auto policies will pick up that cost. So for 0:16:28.520 --> 0:16:33.120 the private insurance industry, UM, a cost like that will 0:16:33.160 --> 0:16:37.280 in fact be picked up and those individuals will be 0:16:37.320 --> 0:16:40.360 made whole for their loss. Okay, so let's move on 0:16:40.480 --> 0:16:43.480 then to what happens to let's say, these commercial lines 0:16:43.520 --> 0:16:48.680 for things such as property, inland, marine, UH and related lines. Right, 0:16:48.720 --> 0:16:51.240 I mean that that is something that travelers as well 0:16:51.280 --> 0:16:55.760 as CHUB. Well that's the group is responsible for. Is 0:16:55.800 --> 0:16:59.840 that correct? That's exactly right. And UM certainly those companies 0:16:59.880 --> 0:17:04.520 do you have some personal lines coverage, but predominantly they're 0:17:04.520 --> 0:17:09.520 commercial writers, and they will be paying UH some flood 0:17:09.800 --> 0:17:15.360 losses because UH that type of commercial policy, UM does 0:17:15.400 --> 0:17:18.560 have an opportunity to bring in flood coverage UH, and 0:17:18.680 --> 0:17:24.280 some individual companies will be taking that coverage and also 0:17:24.359 --> 0:17:30.720 important business interruption. So if your factory or store is 0:17:30.800 --> 0:17:35.240 closed because of a covered peril, you will receive some 0:17:35.440 --> 0:17:40.320 reimbursement for that closure. UM and companies like Travelers, Chubb, 0:17:40.440 --> 0:17:44.760 and a G all have fairly significant market share relative 0:17:44.800 --> 0:17:48.160 to the industry as a whole, and UM they will 0:17:48.200 --> 0:17:53.400 certainly be UM writing some checks to support UM business 0:17:53.400 --> 0:17:57.240 owners in Houston. Is there is there something that we 0:17:57.280 --> 0:18:00.560 should know about the National Flood Insurance Program and how 0:18:00.640 --> 0:18:07.600 that works alongside private insurance, Well, I think UM. The 0:18:07.680 --> 0:18:11.920 important part of that program is unfortunately that it's not 0:18:12.160 --> 0:18:17.560 priced UM very carefully in terms of the actual exposure 0:18:17.560 --> 0:18:20.320 that it takes. As a result, it's operating at a 0:18:20.359 --> 0:18:24.160 loss today. UM. This particular storm will make that worse. 0:18:24.600 --> 0:18:28.200 And really what Congress needs to do is to adjust 0:18:28.280 --> 0:18:32.520 those prices that the n f I P charges in 0:18:32.640 --> 0:18:35.800 order for it to be a sustainable program in terms 0:18:35.840 --> 0:18:39.760 of what it offers the individuals. Today. UM, it's it's 0:18:39.760 --> 0:18:43.120 pretty good coverage. It's up to town and fifty dollars 0:18:43.119 --> 0:18:48.359 for an existing residents plus a hundred thousand dollars for content. So, uh, 0:18:48.640 --> 0:18:51.960 the coverage is good. It just needs to be priced 0:18:52.000 --> 0:18:56.399 in a fashion that it can really be sustainable for UM. 0:18:56.440 --> 0:18:58.600 All the people that to kind upon it and are 0:18:58.640 --> 0:19:03.640 there private insurance company needs that actually participate in reinsurance 0:19:03.720 --> 0:19:07.880 that's then provided to the National Flood Insurance Program UM. 0:19:08.000 --> 0:19:12.240 There are the the the program has just recently begun 0:19:12.359 --> 0:19:17.040 to reinsure some of its exposure, and there were UM 0:19:17.200 --> 0:19:22.840 quite a few in fact, reinsurers that participated in UM 0:19:23.359 --> 0:19:26.480 a contract where a billion dollars was put into the 0:19:26.520 --> 0:19:30.360 private sector. UM their various limits with regard to that, 0:19:30.480 --> 0:19:33.240 but my estimate is that probably the n f i 0:19:33.320 --> 0:19:37.640 P will collect UM a full billion dollars to deal 0:19:37.680 --> 0:19:42.159 with its losses, and those reinsurers would really run the 0:19:42.200 --> 0:19:46.080 gamut UM they're they're typically smaller companies like a Renaissance 0:19:46.160 --> 0:19:51.040 Rey or Validis, but UM, as I said, participated, so 0:19:51.160 --> 0:19:54.639 it would also likely include the likes of the Munich 0:19:54.680 --> 0:19:58.960 reason the larger entities as well. But generally speaking, that 0:19:59.119 --> 0:20:03.199 risk has been spread broadly and it will affect the 0:20:03.200 --> 0:20:09.480 reinsurance companies, but more importantly UM. It's providing participation by 0:20:09.520 --> 0:20:13.720 the private sector to support this program that, as I said, 0:20:13.760 --> 0:20:16.880 we really need to have continue in the future. Well 0:20:16.880 --> 0:20:18.679 We're going to send that note to Congress. They got 0:20:18.720 --> 0:20:20.960 a lot on their docket that they need to do. Jonathan, 0:20:21.320 --> 0:20:23.600 last point to you, what about specialty insurance for things 0:20:23.640 --> 0:20:29.280 like refineries and oil platforms. UM, those certainly are at 0:20:29.440 --> 0:20:32.639 risk as well, and there are a number of entities 0:20:32.840 --> 0:20:37.480 that are specialty companies. UM. Much of that coverage isn't 0:20:37.520 --> 0:20:43.760 what's called the excess of surplus lines market and UM 0:20:44.240 --> 0:20:50.239 it's highly technical because of the UH the difficulties of 0:20:50.520 --> 0:20:54.280 assessing the risk for those types of plant equipment. But 0:20:54.760 --> 0:21:00.119 they will certainly UM be in the number of did 0:21:00.160 --> 0:21:04.080 ease that will see some reimbursement. Jonathan Adams, thank you 0:21:04.119 --> 0:21:21.040 so much, senior insurance industry analyst for Bloomberg Intelligence. I 0:21:21.040 --> 0:21:23.520 want to turn our attention now to an effort by 0:21:23.520 --> 0:21:27.359 the European Union to put together a regulatory framework that 0:21:27.440 --> 0:21:30.680 they say will protect investors. And this has to do 0:21:30.880 --> 0:21:34.880 with the research that investment professionals receive, how much they 0:21:34.920 --> 0:21:37.760 pay for it, and how much it is actually worth. 0:21:37.800 --> 0:21:40.520 Here to help us understand this issue is Larry tab 0:21:40.600 --> 0:21:42.560 He is the chief executive and the founder of the 0:21:42.600 --> 0:21:44.679 Tab Group. They're based in New York, and he joins 0:21:44.680 --> 0:21:47.640 me here in our eleven three oh studios. Larry, thank 0:21:47.680 --> 0:21:51.000 you very much for being great. I want maybe you 0:21:51.040 --> 0:21:55.919 can just start us off by explaining how these regulations, uh, 0:21:55.960 --> 0:21:58.760 and I'll give the full name of it right it's 0:21:58.920 --> 0:22:03.920 markets in Finance show instruments directive method is the way 0:22:03.960 --> 0:22:07.600 that acronym now explain what it is and how does 0:22:07.680 --> 0:22:10.560 that fit into the world of investing? What is so 0:22:10.680 --> 0:22:13.879 people can understand it. So so this is actually method 0:22:13.960 --> 0:22:16.720 to the first method was somewhere on two thousand four 0:22:17.480 --> 0:22:20.320 there and they're they're updating the rules as we speak, 0:22:20.400 --> 0:22:22.520 or they just finished them. We're looking to go live 0:22:22.720 --> 0:22:26.840 January three. UM. There are a couple of parts to it, 0:22:26.880 --> 0:22:28.879 but what they're trying to do is reduce conflicts of 0:22:28.920 --> 0:22:32.560 interest in the investment process. And one of the biggest 0:22:32.560 --> 0:22:34.719 things that they're trying to do is is focus on 0:22:34.760 --> 0:22:38.600 how research has paid for. Traditionally, research has been kind 0:22:38.600 --> 0:22:42.440 of included, um, you know and being paid for as 0:22:42.480 --> 0:22:44.440 part of the trading commissions. When you send me in 0:22:44.600 --> 0:22:46.880 order I send your research, or I send you more 0:22:46.920 --> 0:22:49.800 likely I send your research on on in the desire 0:22:49.840 --> 0:22:52.879 for you to trade with me. UM, I know this company, 0:22:52.960 --> 0:22:55.880 so you should give your order to me. What what 0:22:56.040 --> 0:22:59.000 Europe is trying to do basically is say that now 0:22:59.240 --> 0:23:02.520 that's kind of inducement to trade. I'm giving you something 0:23:02.520 --> 0:23:06.400 of value on the hopes of you sending me um 0:23:06.640 --> 0:23:10.280 orders um and into certain ecenter. An inducement is almost 0:23:10.320 --> 0:23:13.040 like a bribe. So I'm giving your research for the 0:23:13.080 --> 0:23:15.880 bribe for getting your your order to me. So it's 0:23:15.880 --> 0:23:18.800 not just so, it's not just so. What they're trying 0:23:18.840 --> 0:23:22.920 to do is split the payment for research um away 0:23:22.960 --> 0:23:26.359 from trading commissions and trying to get the by side 0:23:26.359 --> 0:23:29.119 traders to focus only on best execution, not have to 0:23:29.160 --> 0:23:33.000 worry about research. Then have the research valued. So I 0:23:33.040 --> 0:23:35.439 have to make an agreement to value every piece of 0:23:35.480 --> 0:23:38.480 research or every research agreement that I have, and pay 0:23:38.560 --> 0:23:42.160 for it either out of of hard dollars, basically write 0:23:42.160 --> 0:23:44.879 a check for it out of my own P and L, 0:23:45.880 --> 0:23:50.439 or really tightly align that with the customer, uh, the 0:23:50.480 --> 0:23:54.240 actual investor. So basically charge that research back to the 0:23:54.280 --> 0:23:59.200 individual customer. How does that work in a world where 0:23:59.240 --> 0:24:02.000 the research can't be linked? Well, maybe it can, but 0:24:02.000 --> 0:24:03.840 where I would think it'd be difficult to link to 0:24:03.960 --> 0:24:06.480 something that is revenue generating In other words, it's great 0:24:06.520 --> 0:24:09.600 if you're making money, you're generating revenue, but if this 0:24:09.680 --> 0:24:12.439 is all the cost side of the business, how do 0:24:12.640 --> 0:24:15.120 you justify it and price it. Well, it's a little 0:24:15.119 --> 0:24:17.760 easier on the equity side because they're commissions. This is 0:24:17.840 --> 0:24:20.320 really difficult on the fixed income side. And the fixed 0:24:20.320 --> 0:24:22.440 income side is included in the fit as well. So 0:24:22.520 --> 0:24:24.760 now you know, on the fixed income side where you're 0:24:24.800 --> 0:24:28.159 not actually paying you know, basis points and commission or 0:24:28.200 --> 0:24:31.480 in the US, you know, since per share, you actually 0:24:31.640 --> 0:24:33.480 have to figure out a way to value this thing. 0:24:33.800 --> 0:24:38.120 And they're still having problems with that. But um yeah, 0:24:38.119 --> 0:24:41.679 you know people the by side firms. The firms have 0:24:41.760 --> 0:24:44.640 to decide how much is this research worth, whether it's 0:24:44.960 --> 0:24:47.760 could be a sector, a sector that's completely you know, 0:24:48.000 --> 0:24:50.480 we're not really interested, but I but I like these guys. 0:24:50.520 --> 0:24:52.959 They put out great insight. The sector is cool. Right now, 0:24:53.000 --> 0:24:54.960 I'm not investing in it, but I still want the research. 0:24:55.240 --> 0:24:56.800 You still have to come up with a value for 0:24:56.920 --> 0:24:59.439 it and pay for it and then assign that payment 0:24:59.480 --> 0:25:01.000 to your clas in or pay for it out of 0:25:01.000 --> 0:25:04.439 your own pano. So what is the conflict or what 0:25:04.560 --> 0:25:07.600 is the challenge of implementing this and where are we 0:25:07.680 --> 0:25:10.679 in that process because these Securities and Exchange Commission has 0:25:10.720 --> 0:25:13.560 got to have a voice in this. Well, initially this 0:25:13.680 --> 0:25:16.080 was thought to be just a European problem, and the 0:25:16.200 --> 0:25:18.800 sec has basically said, you know what, we're not going 0:25:18.840 --> 0:25:20.719 to deal with this as a European problem and we're 0:25:20.760 --> 0:25:22.800 not going to worry about it. As we talked to 0:25:22.840 --> 0:25:25.720 institutional investors and traders, what we're finding out is that 0:25:25.880 --> 0:25:29.119 the the institutions want one way of handling conflicts of 0:25:29.160 --> 0:25:32.120 interest and payment for research around the globe. As well 0:25:32.160 --> 0:25:34.639 as when you look at investment mandates, you know you 0:25:34.680 --> 0:25:37.280 may not necessarily you know, your investment mandate maybe why 0:25:37.320 --> 0:25:40.119 it might be technology, so it might be Apple. It 0:25:40.200 --> 0:25:42.800 might also be vot a phone, so so you know 0:25:43.160 --> 0:25:46.000 a lot. You know, it may not necessarily be geographically focused. 0:25:46.000 --> 0:25:48.800 So you wind up in these issues where okay, well 0:25:48.840 --> 0:25:51.320 this one, I can you know, charge through commissions as 0:25:51.359 --> 0:25:53.960 in the US it's Apple, but you know this one's 0:25:54.000 --> 0:25:55.800 voting phone. It needs to be paid for directly. So 0:25:55.840 --> 0:25:58.480