Pari Sastry

Insurers warn that US weather agency mass firings will hit climate risk data [FREE TO READ] Reinsurance trade group appeals to US commerce secretary Lutnick to preserve data collection after thousands of jobs axed

Private companies use NOAA and USGS data extensively for modeling risks. NOAA weather alerts save lives. These are public goods.

www.ft.com/content/33a4...

The mass firing of both new hires and recently promoted senior staff within #NOAA, including mission-critical and life-saving roles at the National Weather Service (#NWS), is profoundly alarming.
1/11

Speech by Vice Chair for Supervision Barr on supervision and regulation

Fed Vice Chair, Michael Barr: “Often the structure and regulation of insurance markets prevents risk from being appropriately priced, limiting the ability of market signals to influence development and adaptation in high-risk areas and contributing to the buildup of risks.” Bingo.

So ... what's waiting in the queues?

Ah.

emp.lbl.gov/queues

Spatial data folks… AER data editor saying that they’ve already seen impacts on census bureau shapefiles !! With some of these possibly being difficult to access or taken down.

We have to archive everything!

Maybe we should coordinate to create a source of archived data for researchers?

Thank you for these estimates! I have been following closely, it’s helpful to see these in real time.

One question — do you have any analysis, or does anyone have any estimates, of FAIR plan exposures in the impacted zip codes? And a $value of their (gross or net) liability from the fires?

Thank you Catherine!!

Thanks Emily!

Opinion | Our Insurance System Subsidizes Moves to Disaster Zones Our policies encourage Americans to flock to areas particularly prone to climate-related disasters.

www.nytimes.com/2025/01/16/o...
My coauthor Ishita and I wrote a piece that ran today in the NYT about how we need to have risk-based pricing in insurance & mortgages.

So sad to read about the fires. It may take months/yrs to recover.

Climate losses are rising, with largely unknown implications for banks, insurers & HHs. This is why I get mad when academics imply that climate research is just "trendy". These issues are here to stay & we need to understand it.

Takeaway: These are a number of policies that can be put in places to address these skewed incentives.

Aymeric Bellon’s JMP also shows that forcing *lenders* to bear some of these costs also helps to reduce pollution: papers.ssrn.com/sol3/papers....

Drilling Like There's No Tomorrow: Bankruptcy, Insurance, and Environmental Risk (February 2019) - This paper measures the effects of bankruptcy protection on industry structure and environmental outcomes in oil and gas extraction. Using administrative data from Texas, I exploit v...

Here is a link to Jud’s paper www.aeaweb.org/articles?id=...

The American Oil Industry’s Playbook, Illustrated: How Drillers Offload Costly Cleanup Onto the Public Oil executive Tom Ragsdale walked away from his old wells, making the pollution left behind the state of New Mexico’s problem. His tactics, however, are ubiquitous in the industry.

Gambling for resurrection: Financially distressed oil companies drill using more toxic/polluting approaches.

Judson Boomhower’s *amazing* JMP shows that forcing them to buy liability insurance ex-ante gets them to internalize these costs & thus reduce pollution.

www.propublica.org/article/oil-...

From a decarbonization standpoint, this isn’t necessarily bad.

They can pursue their portfolio decarbonization goals without being accused of antitrust violation.

This is why we studied the details of their *targets*, not just whether they were members or not.

Morgan Stanley Follows Citi, BofA in Quitting Climate Group Morgan Stanley terminated its membership of a major climate-banking group, joining a wave of Wall Street firms that recently quit a global alliance intended to aid the reduction of greenhouse-gas emis...

Most of the major American banks (besides JPMC) have quit the Net Zero Banking Alliance - now Goldman Sachs, Citi, Morgan Stanley, Wells Fargo and Bank of America are reportedly out.

Importantly- they’ve all kept their interim decarbonization targets for 2030.

www.bloomberg.com/news/article...

Katharine Hayhoe's Climate + Finance starter pack

Good way to start the New Year:

@katharinehayhoe.com's Climate + Finance starter pack bsky.app/starter-pack...

Yes I want to see that too! Seemed quite slapstick to me as well at first blush, but I’ve heard from a few people that they liked it

I am broadly optimistic because on balance it seems like green substitutes are growing cheaper over time (even when accounting for the subsidies), and brown stuff is struggling to compete. We let’s see.

There are many reasons to be pessimistic though:

1. Uncertainty about IRA’s fate will depress green investment.
2. Plans to open federal lands for drilling & building
3. Discussion around subsidizing fossil fuels
4. US support of the MDBs / blended finance likely to be cut

Going into 2025, reasons to be hopeful about #climate:

Politics has changed the returns to greenwashing, but not green investment…as long as the IRA is preserved. Green jobs being in red states makes this likely IMO. + interest in permitting reform for transmission bottlenecks.

At nearly $3 billion, storm restoration costs for 2024 estimated by Duke Energy appear to be the highest for any US electric utility ever for a single storm season (Hurricane Sandy likely higher in aggregate, but not for one utility). Via S&P: www.spglobal.com/marketintell...

Here is a link to the paper: papers.ssrn.com/sol3/papers....

An interesting story! Strongly relates to our paper on on Fannie & Freddie, and insurance insolvency in Florida. A lot of people think they are fully insured, but find after the fact that their damages aren’t covered. Extremely sad.

papers.ssrn.com/sol3/papers....

Argh I mean Robert Shiller*

Not exactly a population decline, but it is likely that risk-based ricing would lead to a reduction in population growth in high risk areas

That is so kind, thank you so much!! Looking forward to engaging on these issues more, and would love to hear any comments you might have!

Thanks Ben!! Yes, I know we are definitely on the same page about this :)

Mispricing of climate risk is more dangerous than other mispricing. It's not only a large redistribution, it's distortionary because it incentivizes population growth & building in high risk areas! (This is the point of my recent work with Ishita & Ana-Maria)

Your home insurance costs more in high-risk areas. Your mortgage should, too. Fannie Mae and Freddie Mac don’t factor climate change into rates. More frequent floods, hurricanes and wildfires raise systemic default risk.

Happy to share my opinion piece with Stijn on how the GSEs should price climate risks, and the risks that emerge when they don't.

www.marketwatch.com/story/your-h...