Saturday, May 26, 2012

The Insurance Industry: How strong is that safety net?

Among the fallout of natural disasters is the cost of rebuilding. Where does a lot of that financing come from? The government is one of the primary sources; however, the insurance industry is another source. Japan's earthquakes may cost insurance companies up to $34 billion. These insurance companies are also insured by reinsurer companies. They basically insure the insurance companies. This is a small group of companies and this coverage helps keep insurance companies' coverage lower.

It has been a tough 2 years for the insurance industry with disasters in Australia, Chile, New Zealand and now Japan. Fortunately, they are wellfunded; however, with a growing population, especially in areas known for natural disasters and the uncertainty with climate change, these well funded coffers may start shrinking. The result may be us paying more in insurance coverages. These expenses can grow significantly if any of the reinsurer companies go under, which at this time is not an issue. Also, the current expense for Japan may increase depending how the nuclear reactor situation plays out. Let's just all hope that we continue to remain in good hands.

What floated up on the shore? A Brand New Harley Davidson

I always wanted a Harley Davidson. Actually, I am lying. After my disastrous experience at summer camp where I lost control on the Honda 75 bike and wound up in a lake, I have this phobia of riding motorcycles. Nonetheless, one lucky person somewhere on the Alaska shoreline happened to come across a ship cargo container. Inside that cargo container was, you guessed it, a Harley Davidson. Either the person had the same experience that I had with motorcycles or was just an honest person. They ended up reporting this discovery to the local officials. I am not sure if that Harley and the real owner were ever united. Actually, it sounds like a good reality show on network TV, Harley and Me: Reunited. So how in the world did a cargo container with a motorcycle windup on the Alaskan shorelines. Was there some capsized ship in the area holding this cargo? Actually, this cargo originated from Japan. Yes, Japan. Apparently, the West Coast of the United States is coming across many floating items washing up on the shore from Japan. The cause of this beachcomber bounty is the 2011 Tsunami in Japan. Thousands of thousands items from Japan were sucked into the Pacific Ocean as a result of the Tsunami last March. They are slowly floating toward America. Many of these items are on the surface, but there is a lot that are floating underwater. Experts expect that over the next two to two and a half years, the coastlines of California, Oregon, Washington and Alaska will be getting more and more surf with this refuge. It is uncertain whether or not these items would have any significant radiation levels due to the Fukushima Daiichi nuclear plant accident. So next time you are surfing in Huntington Beach and you feel a large object hit your leg, don't worry, it is not a shark. It is probably a Smart Car from Japan. Let's hope that they have perfected the water resistant and impervious Smart Car. If so, you could be driving a brand-new car out of the Pacific onto the sunny shores of California. Also, considering the odds are extremely low that a US customs official will be hanging out on the shoreline to meet you, this is also a great way to avoid any U.S. import tax.

Saturday, May 5, 2012

A Soft Winter Results in Hard Cash

Ignoring the unnerving sense that the climate may be going through drastic changes, there were many benefits of this past mild winter. Chiropractor visits were down due to the reduction in pulled out backs due to shoveling. The number of magical snowmen was reduced in size, which allowed the police force to spend more time on addressing day to day safety and security issues as opposed to fielding calls about snowmen in top hats prancing and dancing down the town streets. On average, many cities in the US saw less than half their average snow. New York City's annual snow average is 25.1 inches. This past winter it was 7.4 inches. Boston has an annual average of 43.8 inches and ended this year with only 9.3 inches. Salt Lake City and Minneapolis average 55.8 and 54.4 inches, respectively. Minneapolis only saw 22.3 inches and Salt Lake had 24.8 inches. The result of these seasonally lower snow falls is more cash in the city's budget because they did not have to spend money on salting the streets and removing snow. In fact, the last two years before this year, many cities were in the red because of the expense of snow removal. In fact, some had to get emergency funding from the state. For example, Lake Tahoe spent about $700,000 this year on snow removal or 24% less than last year. Milwaukee came $2 million under budget for snow removal. Iowa spent only $19.4 million in snow removal this past winter compared to $31.6 million the year before. Also, the cost of maintenance of the streets has reduced because the harsh winter cause wear and tear on the roads, which creates potholes. The other benefits is that many road projects where able to get a jump start this year due to the mild winter. It is easier to do road work when it is 40 degrees and clear skies vs. 10 degrees and driving snow. Unfortunately, the industries that rely on snow for tourism did suffer. And that does has an impact on the states' and cities' tax coffers due to lower taxable revenue. Therefore, for some of these cities, the budget windfall was reduced by the decrease in taxable revenue. In the end, this mild winter provided some form of relief to city and state budgets and the backs of many Americans. Does this mean that cities and states are reducing their snow removal budgets for next winter? The answer is no. In this environment, the only thing that we can count on is the weather is never predictable. Personally, I would not mind another snow free winter. No offense, Frosty. Source: Wall Street Journal, Tuesday, May 1, 2012.