WEBVTT - Bloomberg Daybreak Weekend: Inflation, Weather, Baba 0:00:03.279 --> 0:00:06.160 This is Bloomberg Daybreak Weekend, our global look at the 0:00:06.200 --> 0:00:08.760 top stories in the coming week from our daybreak anchors 0:00:08.800 --> 0:00:12.119 all around the world, and straight ahead on the program Inflation. 0:00:12.560 --> 0:00:14.400 I'm Tom Busby in New York. 0:00:14.560 --> 0:00:17.079 I'm Karin Hety here in London, where we're looking ahead 0:00:17.120 --> 0:00:21.000 to Europe's insurers reporting earnings admit extreme weather. 0:00:21.280 --> 0:00:22.800 I'm Brian Curtis in Hong Kong. 0:00:22.920 --> 0:00:26.040 We look forward to Ali Baba's earnings and to see 0:00:26.079 --> 0:00:28.040 if the environment has really changed. 0:00:28.320 --> 0:00:31.360 I'm Daily Liones in Washington, where we're thinking about libor 0:00:31.440 --> 0:00:33.680 strife and its impact on President Biden. 0:00:36.400 --> 0:00:40.400 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:40.440 --> 0:00:44.240 Eleve them three on New York, Bloomberg ninety nine to one, Washington, DC, 0:00:44.560 --> 0:00:48.560 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:48.880 --> 0:00:53.040 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:53.120 --> 0:00:55.720 the world on Bloomberg Radio, dot Com and via the 0:00:55.760 --> 0:00:57.000 Bloomberg Business App. 0:01:00.080 --> 0:01:01.920 Good day to you. I'm Tom Busby, and we begin 0:01:02.000 --> 0:01:06.199 today's program with Inflation, as we await July inflation data 0:01:06.240 --> 0:01:08.399 coming out this Thursday, and joining us to talk about 0:01:08.440 --> 0:01:11.720 what do you expect and so much more. Bloomberg's Global 0:01:11.760 --> 0:01:15.000 Economics and Policy editor Michael McKee. Michael, thanks for being here. 0:01:15.120 --> 0:01:16.040 Great to be here again. 0:01:16.160 --> 0:01:19.120 Well for starters, what are we expecting to see in 0:01:19.160 --> 0:01:20.760 the July consumer Prices report? 0:01:21.400 --> 0:01:23.000 I hate to do this to you, but I'll start 0:01:23.040 --> 0:01:26.360 by being a little nerdy here. We are expecting inflation 0:01:26.560 --> 0:01:29.920 to rise because there was no inflation in July of 0:01:30.000 --> 0:01:34.720 last year. Inflation came in flat at zero percent change 0:01:34.959 --> 0:01:37.480 in July of twenty twenty two. So if we get 0:01:37.520 --> 0:01:40.720 a little inflation, and we're predicting a little inflation, it 0:01:40.920 --> 0:01:43.800 just is going to make inflation overall go up. So 0:01:43.800 --> 0:01:46.880 we're expecting at this point a two tenths percent gain 0:01:47.000 --> 0:01:49.400 for the month of July, which would push inflation up 0:01:49.440 --> 0:01:52.200 to three point two percent from three percent. And obviously 0:01:52.720 --> 0:01:56.400 that is something the Fed is going to look through 0:01:56.480 --> 0:01:59.440 and analysts are going to look through and not think it's. 0:01:59.440 --> 0:02:00.720 A MA your issue. 0:02:00.800 --> 0:02:03.800 Well, the Fed last month in June three percent. That 0:02:04.000 --> 0:02:07.560 was very encouraging. Still, the Fed voted unanimously to hike 0:02:07.600 --> 0:02:10.320 ats benchmark lending grade twenty five basis points. That's after 0:02:10.639 --> 0:02:13.960 a slight pause in the previous meeting. What would it 0:02:14.000 --> 0:02:18.120 take in terms of CPI for the Fed to change 0:02:18.200 --> 0:02:21.040 up to pause again to know what would we they 0:02:21.080 --> 0:02:22.440 look for. J. 0:02:22.639 --> 0:02:25.120 Powell was asked that question at his news conference after 0:02:25.160 --> 0:02:27.360 that FED decision, and basically he said it would. 0:02:27.160 --> 0:02:28.919 Take several months of a trend. 0:02:29.240 --> 0:02:32.959 In other words, if we saw inflation rising for several months, 0:02:33.320 --> 0:02:36.000 then they would start to think that we have a problem, 0:02:36.040 --> 0:02:38.720 that inflation is coming back and they need to crack 0:02:38.760 --> 0:02:42.480 down more. If inflation were to surprise to the downside 0:02:42.520 --> 0:02:45.959 this month and maybe another month, then the FED might 0:02:46.000 --> 0:02:48.520 be inclined when they get to the September meeting to 0:02:48.600 --> 0:02:49.400 hold off again. 0:02:49.480 --> 0:02:51.960 And the next day we get producer prizes. What have 0:02:52.040 --> 0:02:53.440 we seen there there? 0:02:53.440 --> 0:02:54.680 We've seen some disinflation. 0:02:54.760 --> 0:02:58.320 Producer prices have come down, particularly for energy and food 0:02:58.800 --> 0:03:02.400 and some of the more basic numbers. The issue is 0:03:02.440 --> 0:03:06.359 that we have seen oil prices rise in the last 0:03:06.400 --> 0:03:10.639 couple of weeks, and that could catch It wasn't through 0:03:10.720 --> 0:03:12.720 much of July, but that could catch on to the 0:03:12.840 --> 0:03:15.280 end of the survey and we could see end up 0:03:15.280 --> 0:03:19.120 seeing a little bit of a rise in headline producer prices. 0:03:19.440 --> 0:03:22.320 We'll be watching the core to see if progress continues 0:03:22.360 --> 0:03:25.799 to be made there. Producer prices and consumer prices are 0:03:25.840 --> 0:03:28.680 not directly linked because there are middlemen in the middle, 0:03:29.200 --> 0:03:32.359 but they give you a sort of trend idea of 0:03:32.400 --> 0:03:33.320 which way you're going. 0:03:33.480 --> 0:03:36.400 Now, you talked about energy prices. Oil prices back to 0:03:36.520 --> 0:03:39.040 eighty bucks a barrel. We haven't seen that in several months. 0:03:39.640 --> 0:03:42.080 Gasoline up twenty five cents a gallon in just the 0:03:42.120 --> 0:03:45.520 past week. So now there are legitimate factors in this, 0:03:45.640 --> 0:03:49.280 the heat, opec plus. But is there any end is 0:03:49.720 --> 0:03:51.040 demand is actually down? 0:03:51.760 --> 0:03:54.760 Yeah, the real problem has been time that we've had 0:03:54.960 --> 0:03:59.240 some refinery outages, especially down south, in part because of 0:03:59.240 --> 0:04:03.200 the heat, some unusual outages of refineries, and that's made 0:04:03.200 --> 0:04:06.320 gasoline more scarce. So the price has gone up, and 0:04:06.440 --> 0:04:09.800 there's a feeling that if and when things cool off 0:04:09.840 --> 0:04:12.080 down there. I feel lucky because we're in the Northeast 0:04:12.120 --> 0:04:15.400 where it's not been that hot, But if and when 0:04:15.440 --> 0:04:17.400 things cool off down there, then we should see the 0:04:17.400 --> 0:04:20.320 refineries come back online and prices dropped. So sometime within 0:04:20.680 --> 0:04:21.440 the next month. 0:04:21.720 --> 0:04:27.479 Now, obviously, as opek plus raises the price of the 0:04:27.520 --> 0:04:31.279 input to this oil, that's going to put some upward 0:04:31.320 --> 0:04:34.080 pressure on gasoline prices, but nothing to the extent that 0:04:34.160 --> 0:04:36.839 we have seen. And what would end up happening is 0:04:36.960 --> 0:04:40.920 gasoline prices would not rise by as much and so 0:04:40.960 --> 0:04:43.480 you'd see a down trend in headline. 0:04:43.520 --> 0:04:46.719 And again, people are not filling up like they were before. 0:04:46.760 --> 0:04:49.200 People still working from home, don't need the gas, so 0:04:49.839 --> 0:04:52.200 it's confounding to see it keep going up even though 0:04:52.240 --> 0:04:53.480 demand has leveled off. 0:04:53.800 --> 0:04:56.320 Well, it's been an unusual kind of situation. But what 0:04:56.400 --> 0:05:00.440 happened after this pandemic. Maybe people are flying more. People 0:05:00.400 --> 0:05:03.279 are I don't know about taking a train, but taking 0:05:03.320 --> 0:05:05.640 cruise ships, things like that. We've seen good reports from 0:05:05.640 --> 0:05:10.279 the airlines, so maybe it isn't a driving summer for 0:05:10.480 --> 0:05:12.520 a lot of people. And I guess with the heat 0:05:12.560 --> 0:05:14.320 the way it is, you can understand that. 0:05:14.560 --> 0:05:17.840 Well people are traveling. Part of that consumer confidence has 0:05:17.839 --> 0:05:21.160 moved higher. Fears about a recession. We just had last 0:05:21.160 --> 0:05:25.520 week Bank of America squash the previous forecast for a recession, 0:05:26.600 --> 0:05:29.719 but there are signs consumers maybe pulling back on their spending. 0:05:29.760 --> 0:05:31.440 Let me give you a couple of examples that I 0:05:31.480 --> 0:05:33.880 saw on that is Altria, the maker of Marlborough saying 0:05:34.360 --> 0:05:37.839 people are cigarettes are so expensive, they're buying discount smokes. 0:05:38.839 --> 0:05:42.760 Pepsi says, people want pepsi, but they're going to dollar stores, 0:05:42.760 --> 0:05:44.640 They're going to warehouse clubs trying to get a deal. 0:05:45.279 --> 0:05:49.120 So are we seeing that, you know, are there signs 0:05:49.120 --> 0:05:51.479 that consumers are being more conservative? Now? 0:05:51.920 --> 0:05:54.440 We're kind of getting back to spending levels and spending 0:05:54.520 --> 0:05:56.800 patterns that we saw before the pandemic. 0:05:57.160 --> 0:05:58.159 A lot of people. 0:05:58.120 --> 0:06:02.040 Went to the walmarts and dollar stores and things like that, 0:06:02.160 --> 0:06:05.159 trying to save money in the past on groceries, et cetera. 0:06:05.520 --> 0:06:08.200 And they're going back to that behavior. 0:06:08.600 --> 0:06:10.719 But this is all kind of what you would expect 0:06:10.839 --> 0:06:13.880 in a world that's not overstimulated by the government and 0:06:14.560 --> 0:06:19.279 that is facing higher interest rates and cost of doing business, 0:06:19.320 --> 0:06:21.680 because if it is trying to tamp down on demand, 0:06:22.160 --> 0:06:25.599 the issue becomes when it crosses some sort of line 0:06:25.960 --> 0:06:29.520 and we get to the point where people start to 0:06:29.560 --> 0:06:33.160 worry about recession and then pull back even more and 0:06:33.200 --> 0:06:36.000 we get what results in a contraction. 0:06:36.000 --> 0:06:38.360 And the clock is ticking on something that could really 0:06:38.480 --> 0:06:42.600 change that for forty million Americans. That's the looming restart 0:06:42.640 --> 0:06:45.680 of those federal student loan payments. And that's in October. 0:06:45.760 --> 0:06:46.960 That's coming up pretty quickly. 0:06:47.240 --> 0:06:49.560 That is coming quickly, and it's going to be interesting 0:06:49.600 --> 0:06:53.080 to see what happens because for a lot of people, 0:06:53.960 --> 0:06:58.560 they just use that money to spend on other things 0:06:58.640 --> 0:07:00.720 and in theory still have it. 0:07:00.800 --> 0:07:03.040 They just have to reprogram it to paying bills. 0:07:03.320 --> 0:07:06.279 But a lot of people took out other loans and 0:07:07.560 --> 0:07:09.960 use the money they were saving on their student loan 0:07:09.960 --> 0:07:12.000 bills to pay the other loans. And now they're going 0:07:12.040 --> 0:07:14.720 to have two sets of bills and one set of payments. 0:07:15.520 --> 0:07:19.480 And then there's another group that kept paying throughout the 0:07:19.640 --> 0:07:21.960 entire time period because they figured, well, it's going to 0:07:21.960 --> 0:07:25.640 come back anyway, and I should make progress on bringing 0:07:25.680 --> 0:07:28.520 down my loan, especially when they're not charging me interest. 0:07:29.120 --> 0:07:31.520 And so how that all plays out isn't going to 0:07:31.520 --> 0:07:34.760 be clear, but it isn't completely clear, but it is 0:07:34.880 --> 0:07:36.120 expected to have an impact. 0:07:36.120 --> 0:07:36.360 Now I e. 0:07:36.440 --> 0:07:39.760 Kondoms sort of extrapolate from the total number of people 0:07:39.760 --> 0:07:44.040 with loans and their average loan payment and come up 0:07:44.080 --> 0:07:46.880 with a number like a tenth or two tenths off GDP, 0:07:47.080 --> 0:07:51.960 so not a huge amount, but enough to make a difference. 0:07:51.600 --> 0:07:54.480 Well, a huge amount for people in their twenties and thirties. 0:07:54.480 --> 0:07:56.720 I would think, well, let's talk a little bit more 0:07:56.720 --> 0:08:00.280 about the FED and their timeline the next meeting number 0:08:00.320 --> 0:08:03.800 twentieth right, correct, Well, what do we see between then 0:08:04.040 --> 0:08:07.040 and now that's going to influence the Fed's next decision 0:08:07.080 --> 0:08:10.640 as far as consumer spending, inflation, jobs, and more. 0:08:10.960 --> 0:08:15.400 Well, I've got the couple of jobs reports like the 0:08:15.440 --> 0:08:18.920 one we just saw, and we have another one coming 0:08:18.960 --> 0:08:21.280 up which will give us the August payrolls at the 0:08:21.280 --> 0:08:25.200 beginning of September, and then the CPI report we're talking 0:08:25.200 --> 0:08:28.280 about in another CPI report before they meet again, and 0:08:28.280 --> 0:08:32.280 we'll have one more PCE inflation report along with consumer 0:08:32.320 --> 0:08:35.200 spending at the end of August. So the Fed will 0:08:35.200 --> 0:08:38.199 have a couple of months worth the data before they 0:08:38.200 --> 0:08:39.880 meet again. And that goes back to the point I 0:08:39.920 --> 0:08:42.599 made about what jay Pal said that they want to 0:08:42.600 --> 0:08:45.920 see a couple of months trend to have an idea 0:08:45.960 --> 0:08:48.240 of where we're really going with this. Are we seeing 0:08:48.280 --> 0:08:52.840 inflation come down and demand soften? Are we seeing incipient 0:08:52.960 --> 0:08:56.319 signs of a recession because people are pulling back a lot, 0:08:57.200 --> 0:08:59.920 or is inflation coming back? Those are the questions that 0:09:00.080 --> 0:09:02.120 they hope a lot of this data will answer. 0:09:02.000 --> 0:09:04.800 And it's not just our central bank, but in England 0:09:04.880 --> 0:09:08.640 and in the Eurozone they're dealing with very similar situations, 0:09:08.679 --> 0:09:11.840 but in a way a worse inflation problem over there. 0:09:11.960 --> 0:09:15.199 Is it influencing the US inflation or is it the opposite? 0:09:15.240 --> 0:09:16.880 Are we helping them. 0:09:18.280 --> 0:09:21.400 At this point we are not helping Europe all that 0:09:21.520 --> 0:09:24.599 much because the dollar is strong, so their trade is 0:09:24.640 --> 0:09:31.079 not as vigorous with the US, but it does help 0:09:31.800 --> 0:09:35.920 the United States some now. Trade in this case, because 0:09:36.480 --> 0:09:40.040 we're in a post pandemic situation, is less important between 0:09:40.040 --> 0:09:42.559 the United States and these other countries than it is 0:09:42.679 --> 0:09:47.920 among those countries. The European Union trades heavily among itself, 0:09:48.040 --> 0:09:50.520 and people there have done sort of the same thing 0:09:50.559 --> 0:09:53.880 that we have in terms of cutting back on goods spending, 0:09:54.400 --> 0:09:58.240 and companies have cut back on investments and that's hurting them. 0:09:58.240 --> 0:10:02.800 Manufacturing powers like Germany in France and Italy there because 0:10:03.480 --> 0:10:09.640 their economies are struggling with the lack of manufacturing, and 0:10:09.920 --> 0:10:12.600 we've seen that in the PMI numbers, and we see 0:10:12.600 --> 0:10:15.640 that in the industrial production numbers in the UK. It's 0:10:15.679 --> 0:10:18.080 a combination of things. It's a little bit of that, 0:10:18.920 --> 0:10:23.520 but it's also the bureaucracy brought on by Brexit. 0:10:23.360 --> 0:10:26.599 For trade has slowed trade. 0:10:26.320 --> 0:10:29.599 And made it more expensive. They're still trying to negotiate 0:10:29.720 --> 0:10:33.640 new free trade agreements and they haven't had a lot 0:10:33.679 --> 0:10:36.679 of luck, certainly not with the United States yet, so 0:10:36.840 --> 0:10:39.280 they have the added costs from that as well. And 0:10:39.320 --> 0:10:42.400 then they've got a very strong labor market in the 0:10:42.440 --> 0:10:45.280 same way that the United States does, which also puts 0:10:45.360 --> 0:10:46.720 upward pressure on prices. 0:10:46.840 --> 0:10:50.040 Well, thank you, Michael, And that was Bloomberg's Global Economics 0:10:50.040 --> 0:10:53.240 and Policy editor Michael McKee. Coming up on Bloomberg day 0:10:53.240 --> 0:10:57.400 Break weekend, Insurance companies attempt to change with climate change 0:10:57.480 --> 0:11:11.040 risk lurking. I'm Tom Busby and this is Bloomberg. This 0:11:11.160 --> 0:11:13.400 is Bloomberg day Break Weekend, our global look at the 0:11:13.400 --> 0:11:16.240 top stories in the coming week from our Daybreak anchors 0:11:16.320 --> 0:11:19.760 all around the world. Up later in our program earnings 0:11:19.800 --> 0:11:23.080 from Chinese e commerce giant Ali Baba and the Chinese 0:11:23.080 --> 0:11:26.920 government's role in tech in that country. But first, extreme 0:11:26.960 --> 0:11:30.280 weather gripping many parts of the world, with July likely 0:11:30.360 --> 0:11:33.200 to be announced as the world's hottest month on record. 0:11:33.600 --> 0:11:37.080 The impact on society is enormous and on the insurers 0:11:37.200 --> 0:11:40.040 who navigate climate change. For more, let's say to London 0:11:40.080 --> 0:11:44.040 and bring in Bloomberg Daybreak Europe anchor Caroline Hepgark Tom. 0:11:44.160 --> 0:11:48.560 Europe's big insurers, from Alians to Generali, munich Ree and 0:11:48.679 --> 0:11:51.720 Zero Insurance, are reporting their earnings in the days ahead. 0:11:52.280 --> 0:11:56.480 But Europeans are among the least insured against certain types 0:11:56.559 --> 0:12:00.120 of extreme weather and other natural disasters, something that we've 0:12:00.160 --> 0:12:03.160 seen a lot of across the continent over the last 0:12:03.160 --> 0:12:06.520 few months. For more, I'm joined by Bloomberg's Germany correspondent 0:12:06.520 --> 0:12:10.240 Oliver Crook. Oliver, great to have you with us. Extreme 0:12:10.280 --> 0:12:12.480 weather has hit Europe in the past few months in 0:12:12.520 --> 0:12:15.840 a way I think, I'm sure you'll agree that has 0:12:16.040 --> 0:12:19.840 made many people think about climate change in a totally 0:12:19.840 --> 0:12:20.320 new light. 0:12:20.400 --> 0:12:23.160 Don't you think I would think so? But you know, obviously, 0:12:23.200 --> 0:12:25.960 as you know, this is an exceedingly polarized issue for 0:12:26.080 --> 0:12:28.360 some people. It's hard, though, when you see the kind 0:12:28.400 --> 0:12:31.320 of trend in terms of the temperatures rising over the 0:12:31.360 --> 0:12:34.400 last century to kind of not at least pose yourself 0:12:34.480 --> 0:12:37.320 the question, particularly when you see the ways that it touches, 0:12:37.440 --> 0:12:39.319 you know, human life in all this different way. We've 0:12:39.320 --> 0:12:42.960 talked about how it touches agriculture. Sometimes it's cooking food 0:12:43.080 --> 0:12:45.720 right on the branch you have. You know, all these 0:12:45.880 --> 0:12:48.000 rivers drying up. The Rhine is one we've talked about 0:12:48.000 --> 0:12:50.560 a lot of the most important waterway in Europe. You 0:12:50.559 --> 0:12:53.480 know that moves just tons and tons and tons down, 0:12:53.600 --> 0:12:56.400 up and down every single day, and that basically becomes 0:12:56.480 --> 0:12:59.120 unnavigable at a certain point. We've seen it in France 0:12:59.160 --> 0:13:01.640 with the nuclear react they can't draw enough water to 0:13:01.720 --> 0:13:04.440 cool off, and obviously these wildfires in Greece. So I 0:13:04.440 --> 0:13:06.439 think it's front of mine for everybody. I think the 0:13:06.559 --> 0:13:08.880 challenge that the market has is how do you price 0:13:08.960 --> 0:13:11.160 these risks and how do you think about these financially? 0:13:11.760 --> 0:13:11.960 Yeah? 0:13:11.960 --> 0:13:14.880 Absolutely, And you were speaking to someone very interesting Munich 0:13:14.920 --> 0:13:17.880 reads ernst Rauch about this, because they've got a whole 0:13:17.880 --> 0:13:22.280 climate center and they do big reporting not just on 0:13:22.320 --> 0:13:25.560 their own business, but kind of more broadly across the 0:13:25.600 --> 0:13:29.480 insurance sector. They've also Munich re itself has its earnings 0:13:29.559 --> 0:13:34.280 coming up in the days ahead. Is weather making certain 0:13:34.320 --> 0:13:35.640 things uninsurable? 0:13:36.320 --> 0:13:38.040 So this is the this is the question. I asked 0:13:38.120 --> 0:13:40.400 him if it made things uninsurable? And so he gave 0:13:40.400 --> 0:13:42.480 a sort of interesting response that he said, listen, we're 0:13:42.480 --> 0:13:45.560 an insurance company. We will ensure anything. The problem is 0:13:45.600 --> 0:13:47.600 you will not be able to afford it. And they 0:13:47.600 --> 0:13:49.760 look at a sort of simple equation about kind of 0:13:49.800 --> 0:13:52.760 the risk that is generated by kind of natural disasters, 0:13:52.920 --> 0:13:55.000 how vulnerable we know, how and what ways have you 0:13:55.040 --> 0:13:58.000 mitigated it, and the underlying value of the assets, and 0:13:58.040 --> 0:14:00.240 he says that even despite the latter two, so what 0:14:00.320 --> 0:14:04.400 he's seeing across the globe is a high higher risk 0:14:04.800 --> 0:14:07.560 of basically weather related events. He says eighty to ninety 0:14:07.600 --> 0:14:10.120 percent is down to weather, and that a third of 0:14:10.160 --> 0:14:11.960 all of the losses in the first half of this 0:14:12.160 --> 0:14:14.440 year we're not down to actually a single weather event, 0:14:14.480 --> 0:14:17.559 but just more powerful storms over in the United States. 0:14:17.840 --> 0:14:18.040 Yeah. 0:14:18.040 --> 0:14:22.320 Absolutely, And the data that munich Re pulled together showing 0:14:22.400 --> 0:14:25.640 a near record year for losses due to natural disasters, 0:14:25.640 --> 0:14:28.920 so things like earthquakes in Turkey and Syria and the 0:14:28.960 --> 0:14:31.560 storms that you mentioned in the US. I mean, the 0:14:31.640 --> 0:14:33.600 numbers globally are quite staggering, aren't they. 0:14:34.200 --> 0:14:36.440 Yeah. Absolutely, I mean one hundred and ten billion dollars 0:14:36.440 --> 0:14:38.560 in the first half of the year. And really, again 0:14:38.600 --> 0:14:41.320 I was very interested to speak to him because you know, 0:14:41.560 --> 0:14:44.240 in a topic that is polarized for many people, it's 0:14:44.280 --> 0:14:47.360 their business to understand what is going on in the 0:14:47.400 --> 0:14:49.680 world and to try to appraise that risk. So I 0:14:49.720 --> 0:14:52.720 asked him about kind of how he really thinks about 0:14:52.760 --> 0:14:54.640 climate change and how many you know, how much are 0:14:54.640 --> 0:14:57.800 these losses can we say are really attributable to climate change? 0:14:58.120 --> 0:15:02.640 We observe up what of losses from weather related events 0:15:02.640 --> 0:15:05.840 in many parts of the world, and with many weather 0:15:05.880 --> 0:15:10.160 related perils, depending on the region, it is flooding, it 0:15:10.200 --> 0:15:13.840 can be what's called these convective storms of severe thunderstorms 0:15:13.840 --> 0:15:16.920 in the United States, or wildfires in some parts of 0:15:16.960 --> 0:15:20.440 the world. So with this upward trend, we of course 0:15:20.520 --> 0:15:23.600 as a risk management company, we need to understand what 0:15:23.880 --> 0:15:27.840 are the drivers of this trend, and the first element 0:15:28.000 --> 0:15:33.360 of these drivers are socioeconomic factors, so increasing wealth and 0:15:33.440 --> 0:15:37.840 population and inflation of course today plays a major role 0:15:37.920 --> 0:15:42.800 in this as well. However, even after adjusting for inflation 0:15:42.960 --> 0:15:46.440 and wells, we do see in some regions upward trends 0:15:47.080 --> 0:15:50.160 with respect to losses which cannot be explained by these 0:15:50.200 --> 0:15:54.800 socio economic factors. And here we analyze and also meteorological data. 0:15:54.880 --> 0:15:59.560 We collaborate with scientific organizations in order to understand whether 0:15:59.600 --> 0:16:05.480 they're a link between increasingly severe weathers it's understorms of flooding, 0:16:05.560 --> 0:16:09.280 extreme rainfalls and others and the losses we observe. And 0:16:09.400 --> 0:16:12.880 the outcome is as of today, is that we have 0:16:13.440 --> 0:16:18.120 strong indications, not a scientific proof, but strong indications that 0:16:18.400 --> 0:16:21.760 part of the increase of losses is already driven by 0:16:21.960 --> 0:16:25.760 changing weather patterns, and they are by themselves driven by 0:16:25.760 --> 0:16:26.960 climate change, and. 0:16:26.960 --> 0:16:29.320 Sort of regardless of the cause, if this is just 0:16:29.440 --> 0:16:32.680 proportionally and numerically going up, this obviously is going to 0:16:32.720 --> 0:16:35.800 bear on the price of ensuring things. Can you talk 0:16:35.840 --> 0:16:38.400 to me about how much more expensive insurance is going 0:16:38.440 --> 0:16:40.240 to get as a result of these changes. 0:16:40.920 --> 0:16:45.040 Well, first of all, if the has a component of 0:16:45.200 --> 0:16:49.760 our analysis, so the probability of severe flooding or severe 0:16:49.840 --> 0:16:53.640 other weather events is increasing and or the intensity of 0:16:53.960 --> 0:16:58.200 these events, then yes, the overall risk increases and that 0:16:58.520 --> 0:17:03.480 drives the premium. Now the question is, of course, by 0:17:03.560 --> 0:17:05.280 how much, and there. 0:17:05.200 --> 0:17:09.360 Is no simple answer, especially no uniform answer for all 0:17:09.480 --> 0:17:11.160 parts of the gold or parents. 0:17:11.240 --> 0:17:12.760 I also want to talk to you about the risk 0:17:12.840 --> 0:17:16.000 not just of insurance prices going up, but basically parts 0:17:16.040 --> 0:17:19.320 of the world becoming uninsurable. We hear about this in Florida, 0:17:19.440 --> 0:17:22.000 you know, California possibly a risk. Now we see kind 0:17:22.040 --> 0:17:25.040 of weather patterns changing and how hot it's getting across Europe. 0:17:25.720 --> 0:17:28.680 What's the risk for the uninsurable portions of the world 0:17:28.680 --> 0:17:30.560 where you just cannot make an assessment or it's just 0:17:30.600 --> 0:17:31.159 too risky. 0:17:31.720 --> 0:17:35.000 The challenge is much more if we look at the 0:17:35.240 --> 0:17:40.400 need to adjust our prices in line with increasing risks, 0:17:40.480 --> 0:17:44.120 and here climate change drives up the risks and as 0:17:44.119 --> 0:17:47.680 a consequent drives up the risk premium. 0:17:47.880 --> 0:17:51.199 So that was answer Ralph ahead of Corporate Climate Center 0:17:51.320 --> 0:17:55.040 at Munich re speaking to you, Oliver. As we think 0:17:55.080 --> 0:18:00.320 then about you know, the financial consequences of this, how 0:18:00.320 --> 0:18:02.760 do we think about then the earnings that we're going 0:18:02.840 --> 0:18:06.080 to get from Munich read zero Insurance, General, Ali and 0:18:06.119 --> 0:18:09.080 the other big insurance names across Europe. 0:18:09.400 --> 0:18:11.840 Yeah, so listen, I'll talk about Alians because they're sort 0:18:11.840 --> 0:18:14.080 of the biggest and they would released over on Thursday 0:18:14.119 --> 0:18:16.159 and so they you know, they've actually have had a 0:18:16.160 --> 0:18:18.640 pretty good run. And what's interesting is because Alliance also 0:18:18.680 --> 0:18:22.840 has this massive asset management unit, but actually this year 0:18:23.520 --> 0:18:26.040 it's the insurance that's done the heavy lifting. Their insurance 0:18:26.040 --> 0:18:28.439 side of the business has done very well and they 0:18:28.480 --> 0:18:31.199 may even raise you know, operating profit outlook, and so 0:18:31.240 --> 0:18:34.359 things are looking very solid in the insurance sector. They've 0:18:34.359 --> 0:18:36.920 actually you know, they I don't know how big natural 0:18:36.960 --> 0:18:39.840 catastrophe will be in terms of their bottom line. We 0:18:39.880 --> 0:18:42.639 may see some more claims in Italy and Germany in 0:18:42.680 --> 0:18:44.960 the second quarter due to the floods, but they did 0:18:44.960 --> 0:18:49.040 not have huge natural catastrophe expenses over in the first quarter, 0:18:49.080 --> 0:18:51.719 and that is in part, perhaps, Caroline. Something that we 0:18:51.800 --> 0:18:53.720 I'm sure we will talk about is the lack of 0:18:53.800 --> 0:18:56.960 insurance for natural disasters here in Europe. I was actually 0:18:56.960 --> 0:18:58.400 astounded by some of these numbers. 0:18:58.720 --> 0:18:58.920 Yeah. 0:18:58.920 --> 0:19:04.320 Absolutely, This, this idea of the underinsured in Europe is 0:19:04.800 --> 0:19:07.960 a big issue, especially as you say, you've highlighted well 0:19:08.000 --> 0:19:10.480 the wildfare is in Greece, but there've been drought conditions 0:19:10.520 --> 0:19:13.080 in Spain as well as along the River Rhine. 0:19:13.640 --> 0:19:13.840 Yeah. 0:19:13.880 --> 0:19:15.840 Absolutely. And when you look at a sort of global 0:19:15.880 --> 0:19:19.879 breakdown of kind of what is uninsured Asia Pacific, fifty 0:19:19.960 --> 0:19:23.280 seven percent of the direct losses are uninsured North America. 0:19:23.440 --> 0:19:26.919 That's only twenty four percent globally on average, it's sixty 0:19:26.960 --> 0:19:30.679 one percent. In Europe, it's almost ninety percent. So I 0:19:30.720 --> 0:19:32.600 mean that that to me came as a you know, 0:19:32.640 --> 0:19:34.159 as a real shock. You think of a kind of 0:19:34.200 --> 0:19:36.960 more developed nations and richer nations are kind of more 0:19:37.040 --> 0:19:39.800 risk averse and more willing to ensure certain assets, and 0:19:39.840 --> 0:19:42.240 I was really stunned to discover that that's the sort 0:19:42.240 --> 0:19:43.880 of europe European figure. 0:19:43.600 --> 0:19:46.919 Here absolutely, Oliver, thank you so much for joining me. 0:19:47.000 --> 0:19:50.280 We look ahead then and await the earnings in the 0:19:50.320 --> 0:19:52.879 next few days from the big insurance names hit in 0:19:52.920 --> 0:19:57.440 Europe Alians generally Munich Res Insurance and others, so there'll 0:19:57.480 --> 0:19:59.480 be a lot of focus on those results. Thank you 0:19:59.520 --> 0:20:02.040 so much for being with me. I'm Caroline hepgear here 0:20:02.040 --> 0:20:03.879 in London. You can catch us every weekday morning for 0:20:03.960 --> 0:20:05.960 bin Bag Daybreak you at the beginning at six am 0:20:05.960 --> 0:20:07.760 in London. That's one am on Wall Street. 0:20:07.800 --> 0:20:11.199 John, Thank you, Caroline, and coming up on Bloomberg day 0:20:11.240 --> 0:20:14.760 Break weekend, Ali Baba earnings and the Chinese tech industry. 0:20:15.160 --> 0:20:24.199 I'm Tom Busby. This is Bloomberg. I'm Tom Busby in 0:20:24.200 --> 0:20:26.040 New York with your global look ahead at the top 0:20:26.080 --> 0:20:28.840 stories for investors in the coming week. What's next for 0:20:28.960 --> 0:20:32.600 tech companies in China following the end of a government crackdown. 0:20:32.760 --> 0:20:35.720 Chinese e commerce giant Ali Baba among those in focus 0:20:35.800 --> 0:20:37.920 with an earnings report on tap and for more. Let's 0:20:37.960 --> 0:20:41.080 go to Hong Kong and Bloomberg Daybreak Asia host Brian. 0:20:40.840 --> 0:20:44.359 Curtis Tom Ali Baba reports earnings in the coming week, 0:20:44.400 --> 0:20:46.560 and the results will be arriving at a time that 0:20:46.640 --> 0:20:50.720 the landscape is changing fast, especially for big platform companies 0:20:50.720 --> 0:20:53.680 in China. Ali Baba, May Twan and Peers make it 0:20:53.760 --> 0:20:57.119 an extra subsidy through twenty twenty four to speed up 0:20:57.160 --> 0:20:59.959 their business expansion. That's a step that Paul, as you make, 0:21:00.240 --> 0:21:03.400 is hope will speed up consumption in the country. China 0:21:03.440 --> 0:21:05.840