You're listening to the Bloomberg Opinion podcast counts Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
Welcome to Bloomberg Opinion. I'm Amy Morris. This week we look at manufactured homes, how to reinforce them, protect them, and help residents who live in them. We'll also look at how a new trend in tipping might actually be hurting those who need those tips the most, and later a look at the alcohol industry, which is facing a real threat from competition and low to know alcohol trends.
Let's begin, though, with a look at insurance, especially as we are seeing more severe weather, which is prompting more insurance companies to pull out of high risk areas. Experts are warning of an insurance crisis unfolding as natural disasters get more expensive and insurance companies bail Benjamin keys Is with the University of Pennsylvania Wharton School of Business.
We think of Florida, Arizona, Louisiana as being popular retirement destinations, and those destinations just got a bit costlier to move to because of rising insurance costs.
Well, now it's probably a good time for property owners to check those insurance policies and buckle up for dramatically higher costs. You can blame climate, macroeconomic pressures, political factors that have battered the insurance industry in recent years. Let's talk about it now. Bloomberg opinion columnist David Fickling joins me. David covers Energy and Commodities. David tell us what we might find as we do start to review our insurance policies.
Yeah, well, it's looking a pretty rough year for anyone who's got an insurance policy. Beasley PLC one of the UK based insurance but have a lot of coverage in the US. They said recently that propertian is in the US are already seeing annual rate increases averaging seventeen percent. So, you know, a year when we're already seeing pretty high inflationary costs, insurance is going up faster than the fastest
grade of inflation. And if anything, that maybe understates some of what we've got coming down the pipe, because that's looking at the looking at the rate increases for everybody, and of course the rating increases will be most severe for those who've experienced natural disasters and some of that, some of what we're seeing there is extremely severe, and I think particularly if you look at what's being paid by reinsurers, the cost of to renew policies for reinsurers
is fifty percent in the US and in Australia, if you've been exposed to disasters, it's going up seventy five percent. So there's some really extraordinary increases that we're seeing at the moment. Even insurance you hadn't had catastrophic disasters, we're having to pay twenty percent more than a year ago. And that cost which is you know, remember the structure
of insurance. You have you take out a policy with your insurer, and then your insurer takes out a policy with a reinsurer to cover the really big costs from from the big natural disasters that they struggle to cover on their own. The pricing that they are paying to reinsurre as gets you know, gets knocked on down down the track. If they're having to pay a lot extra to reinsure as they're having to get a lot lot extra on your premiums or alternatively, they're having to exclude
things the previously they didn't exclude. And of course we're also seeing as a result of this a lot of people who just simply can't really afford insurance anymore.
So is this because of the natural disasters that we've seen of late.
I'm going to reach for a classic insurance disaster industry cliche and say it is a perfect storm, But there is a combination of several factors that are happening at the same time. They're actually the actual disasters that we've seen recently, they're because of climate change and also generally just because insurance losses always rise, because they rise with income, they rise with population growth, they rise with people putting more of their money into the capital stock of their
buildings and things like that. Insurance costs always rise. But we've seen, you know, we've seen a run of record years in recent years that the most recent big disaster obviously in the US hurricane dial it doesn't seem to have been actually a particularly dramatic one. I think the modeling now is suggesting it's sort of low single digits of billions. Sounds like a lot of money, but for
the insurance industry, that's pretty that's pretty small potatoes. That in itself is not that much to worry about, so yes, but I think the other factors to consider is a lot of the sort of macroeconomic factors that come in here.
For most of the period that we've been growing more concerned seeing some of these bigger impacts from climate change, it's been over the past fifteen years when interest rates have been very low and when inflation has been very low, And the one thing that insurers and reinsurers worry about
more than climate change and natural disasters is inflation. The reason for that, if you think about the model when you pay your insurance premiums, the insurer does not expect to pay out your losses if something happens to your
house from the money that you pay them. The way the model works is they take your premiums and they invest it and they can only you know, they can only cover your losses based on the investment returns and what they're investing in because their conservative conservative investors is bonds.
And of course, so the bond bull market of the past fifteen years had been you know, was immensely good for the insurance industry, and that although consumers probably didn't feel that way, that meant the insurers were pretty lenient over the past sort of ten to fifteen years, you know, to householders, to people with insured property. This has now changed. The bond billmark is over. You've got this, you've got high rates of inflation, which are meaning on their investment portfolios,
a lot of them are making losses. They're certainly not making good you know, good returns on those portfolios to cover the losses that they have to pay out. And another fact that we have, of course, is that the period of very low interest rates has has come to an end, and that means that there was over the last fifteen years, there were a lot of different types of investors that were getting into the insurance industry in
their search for different for better yield. So you would have you know, hedge funds, you know, there were a lot of you know, bond investors, catastrophe bonds, sovereign wealth funds, pension funds, all sorts of new investors were coming in and that was providing capital to the insurance industry, and that allowed them to push down or compete down the premiums that we were paying. Interest rates have gone up. It's a lot easier for those investors to find yield elsewhere,
so they're not going to the insurance industry. So again that has that has been its big macroeconomic factor. As we've moved from a low rate, low inflation environment to a high rate, high inflation environment, some of those macro factors that made insurance more affordable for the past fifteen years have disappeared as a result of what insurers are having to do is pass the costs back on to householders.
We're talking with Bloomberg opinion columnist David Fickling about how severe weather is a perfect storm for the insurance industry. David, have we seen this before?
Well, the inflationary situation, I mean, we're this is sounding slightly long in the tooth reference, but there was you know, during the last period of high inflation that you saw in the sort of early to mid eighties, there was a real significant crisis for the insurance industry connected to that because it did a lot of damage to their
investment folios. At that point. It was you know, it was also accentuated by some of the you know, quite big unusual losses that came in around about the eighties. Of course, we had we had the period of things like asbestosis, uh, you know, a lot of insurers found that they they had cover for asbestos damage, but they weren't they you know, they hadn't really modeled those risks because that you know, the problems with asbestos weren't known
until then. A lot of money was paid at There are a lot of big disasters in the late eighties, sort of oil tanker disasters, the you know, the the x on Valdis, the Tory Canyon I think, and most famously what you know, what I ended up resulting from that sort of series of of of linked disasters that that you know, the Lloyds of London, the you know, the original sort of shipping insurance market that's been been running from three hundred years, suffered an absolute crisis that
caused a lot of the syndicates there at Lloyd's to lose a great.
Deal of money.
So the insurance industry has been through this sort of thing before, and it's a reason why they're very, very wary of inflation because of what it's done to them in the past. Now I think what we're going to see, I mean, insurers and reinsurers are very circumspect about their job is managing future risks and they're very good at it. And of course the way they do it is something that we tend to forget and don't like very much,
which is that they just stop insuring risks. They either price risks so high that we can't afford them, or they just withdraw coverage altogether from areas. And I think we tend to think. I mean, you'd often have heard I think over the past ten years, people talking about climate and insurance saying, well, we have you know, the insurance industry is a great model for sort of you know, for pricing risks and that will sort of take away the risk of climate change. Well, it doesn't take away
the risk. It moves the risk around and the insurance industry to be always making a profit. And if those risks get so high that it's not making a profit, then the insurance industry will withdraw. If you look at Florida, for instance, is the classic example, although if you look at the insurance market there it is completely broken. Less than one in five Floridians have flood protection in their
insurance policies. Bear in mind, another effect that we have from inflation is that the cost of rebuilding is going up very dramatically. So even if you thought you had enough money to rebuild your house five years ago, you probably don't have enough money to rebuild your house now. So all of those factors mean that people who previously thought they were sort of under the protective umbrella of insurance really finding the umbrella rather threadbare at this point.
Bloomberg Opinion columnist David Fickling coming up. We're going to continue this conversation from a different point of view. What have we learned about, say, manufactured housing and severe weather and what needs to be done for those That's just ahead. You're listening to Bloomberg Opinion.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays at one and seven pm Eastern on Bloomberg dot Com, the iHeartRadio app, and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion. I'm Amy Morris. We are talking about the aftermath of severe weather and the impact on manufactured homes. Before Hurricane Adalia slammed into Florida, the mayor of Tampa, Jane Caster, was warning residents in low lying neighborhoods and in mobile homes to get out. Understand that Mother nature wins every time.
So if you have the opportunity to evacuate, and you can, you should, please please do.
After Hurricane Adalia, some of the most endearing images are of mobile and manu factored homes battered and flood damaged. So what can be done to protect these manufactured homes and why do they even need protecting. Let's bring in Bloomberg opinion columnist Jonathan Levin, who covers finance markets and M and A Jonathan. Manufactured in mobile homes absolutely are affordable homes. But just bring us up to speed. How many people live in these homes? Let's start there.
Yeah, millions and millions, and it's even a greater share of Floridians. So you know, we're talking six seven percent of occupied housing stock here in the Sunshine State. And you know, it's important to say that it's a really, really important source of housing here in the Sunshine State and across the sun Belt where affordability has become more and more of a challenge in recent years.
You say, lawmakers should improve the planning and the oversight of these mobile home parks, Like what what is lacking?
Yeah, so a couple of things.
So a uh, you know, manufactured housing tends to be subject to a lot of nimbiism. It's this this sort of entrenched nimbism in in a lot of municipal codes. And because of that, manufactured housing tends to end up in places like you know, unincorporated parts of the of various counties.
Uh.
Right, So these also, not so coincidentally, can often be some of the most vulnerable parts of the county do to climate change. So I think the very first thing that that lawmakers and other leaders in our communities need need to consider is that manufactured housing needs to be a part of the plan from the beginning. It can't just be this this afterthought.
Uh.
And and it can't uh it just be you know, cast off to the these sort of no man's lands, because like wealthier communities, I don't want to don't want to.
Look at it.
That's it's not a sustainable and it's not a safe solution for this kind of housing. The key point here is some of these structures are actually very very good. If you look at the kind of manufactured housing that has come out since nineteen ninety four, since a critical revision in the way the federal regulations were these kinds of structures are actually pretty good, and they're just as good as anything else when it comes to flood specifically.
Again, the issue is when.
You community biases come into play and these sorts of housing get cast off into the middle of nowhere, then you have these communities which tend to skew a little bit lower income and are inherently vulnerable. Because of that, you have them placed in some of the most vulnerable jurisdictions in various counties and states.
The conventional wisdom is all so that it's not safe. You were just addressing that that that's sort of an overgeneralization that maybe tornadoes are not going to look for the trailer parkin and target it, which is an ongoing joke. I'm from South Carolina, so I remember those jokes a lot where we had, you know, areas where folks were living in mobile homes or manufactured housing, and those seemed
to be the ones that were the most vulnerable. Your point being, it's not the trailer, it's not the house, it's not the manufactured housing that's vulnerable. It's the location.
Yeah, there's that, and there's a couple of other things. So Another thing that I talk about my recent piece is sort of aligning economic incentives. A key problem with manufactured housing is that oftentimes while residents will own the structure, they will not own the land right They're oftentimes found
in these parks, and residents are essentially renters there. So if you do have an unscrupulous landlord who just wants to pinch pennies and maximize profits and doesn't invest in the right sort of infrastructure and storm preparedness, that can also be a problem area. So you know, as part of the solutions that I sort of propose and review in my piece, I suggest that there really also needs to be increased oversight of landlords. You know, this has been a popular investment for private equity.
It's a private it's.
A popular investment for reds, And I'm not saying that all or even most of them are bad actors, but in an environment where the economic incentives aren't necessarily aligned all the time, you do need government to come in and make sure that everybody is acting properly.
And we are talking with Bloomberg opinion columnist Jonathan Levin about the role of manufactured homes in the US and world, why they need protecting. You mentioned community planning and how it needs to document and corporate manufactured home communities, giving them more of a footprint, more stability within those planned communities. Is that going to get any attraction? I mean, like you say, there's this sort of attitude about mobile homes that isn't always very flattering.
I think you know, one key solution, one key longer term solution to all of this is potentially to give manufacture housing residents more self determination. So again I make the point that there's this problem of aligning the economics incentive so that people want to invest in resilience, and one way to do that is to give them ownership
of that plot of land. So a lot of times what happens, and what can be be a dangerous situation is a park gets sold and somebody comes in and they want to start pinching pens these What if, you know, when parks get sold, the government requires the seller to consider an offer from the community. What if the community could could come in and you know, pool their money and make an offer themselves, then you have better alignment
of economic incentives. You have a group of people who want to invest in the resilience of their terrain, and there's some really good research that suggests that that can be a good long term solution.
Is there a need for government then to intervene here?
Correct?
Yeah, So some of the best laws that have been going on the books recently do a couple of things. So they will say that when a piece of property is going up for sale, residents should be alerted in advance, right, you know, you can't give somebody forty eight hours to
bring the community together and make an offer. The government and authorities in general should also be given advance notice, and it's important to have some sort of requirement that that fair consideration is actually given to the community's offer. So one form that that can take again is a right of first refusal.
You also mentioned nimbiism a couple of times earlier in this interview. Perhaps part of the solution is the rest of us changing our attitudes.
Yeah, exactly.
I mean, so manufactured housing, it's important to point out at the end here it's.
A really really broad category and if you.
Look at some of these structures, you wouldn't know that they are that they are manufactured housing.
These are not, you know, trailer parks.
Classically, classically speaking, and so yeah, it's you know, manufactured housing is going to be an important part of our affordable hoigh housing challenges here in the United States, and it's important to embrace it as as such and not bring so many biases to the debate to start with.
Jonathan Levin is a Bloomberg opinion columnist who covers finance, markets and M and A and don't forget We are available as a podcast on Apple, Spotify or your favorite podcast platform. The alcohol industry has been thriving despite a streak of threats, the legalization of marijuana, a trade war with China that has hampered US exports, the rise of the sober curious movement, and now a new risk one few investors or companies are publicly acknowledging could pressure sales,
and that is weight loss drugs. Lisa Jarvis is a Bloomberg opinion columnist. She covers biotech, healthcare, and the pharmaceutical industry, and she joins us Now, Lisa, we know these weight loss drugs are reshaping the weight loss market. How is there a threat now or an impact to the market for alcoholic beverages.
It's this unexpected side effect of these drugs which is that people just don't really have the desire to drink. Not all people, but a healthy chunk of them. One survey said that about sixty two percent of people who take these drugs drink less alcohol. I think two things are going on, you know. One is that they just make alcohol less appealing or any addictive substances, including food,
less appealing. And then two, I think you feel full faster, So even if you kind of force yourself to drink it, you can't have more than one drink before it is really unpleasant for you.
So food, nicotine, alcohol, opioids, those sort of addictive substances. And you were the one who said that food can be an addictive substance, And as a layman, I would say, yeah, it's probably true. It dampens the rewards that goes up into your brain and it says this isn't pleasant for you. Is that how it works?
That's right. It's dampening the kind of rewards circustry circuitry in our brains that tells us to keep going. And you know that kind of hit you get when you eat something in sugary, or you know, you have a glass of alcohol, or I suppose smoke a cigarette and so it's it's affecting that particular circuitry in the brain, and they think that's why it is that we're seeing the side effect that you know, I would say for
some people that's a happy side effect. I've talked to a lot of people now who are taking these drugs, and some of them thought that one added bonus of going on them was the fact that it could help them kind of get their drinking a little more in check, especially coming off of the pandemic.
I wonder if these drugs, the the ozebic and these weight loss drugs could be used then for addicts, like maybe marketed to physicians or to a clinic ex fo addicts who maybe really are looking for a way out and for help.
Yeah, I mean, there definitely are studies going on. There's some researchers at the University of North Carolina that are looking at this. They're conducting clinical studies to sort of say, Okay, you know, here's how well they work for different substances for people who have substance use disorder. And I think that kind of paves the way we have good data
in a different various animal models. I think rats, mice, monkeys, monkeys are a lot like humans, and so you know, and then we've got just at this point, scads of anecdotal data. Like I said, I've talked to a lot of people who take these drugs. You know, I'm not the only one who's written about this. I think other reporters have caught onto this trend that you know, you can find it on TikTok too, that people are drinking
a lot less. And so now what we need is just studies to understand who benefits from that, because like I said, it's not everyone, and then how well it works, you know, if you're someone who's you know, maybe just a moderate drinker that wants to repair back versus someone who has an actual substance used to disorder.
And we are talking with Bloomberg opinion columnist Lisa Jarvis about how a weight loss drug might actually impact the alcohol industry. A side effect Lisa, that nobody really saw coming. How unusual is it to have a drug that is designed for one use like this was diabetes, for example, and then there's another use discovered in this case weight loss, And now there's this third side effect is that the appropriate term where they realized that it dampens the rewards
for addictive substances. This is sort of a triple threat, like in one injection. How did they figure this out?
Right?
I mean, it is unusual. We certainly have examples of other drugs that started out being studied for one thing and ended up being much more useful for something else. And that's actually usually how it works. Maybe it didn't work in heart disease, but it turns out to work interactile dysfunction. That's what happened with biagra, for example. But it's not typical, and it's not typical that it would
work so well in all of them, you know. So, like you said, we started with diabetes, they saw that people were also losing more weight than other diabetes drugs induce. And now we're seeing this other side effect, and you know, I think there's just a lot of ripple effects across
many industries of these drugs. It's very unexpected. And so, you know, I think as we learn more about the receptors that these drugs are hitting, which ones work better when it comes to substances, we'll start to sort out what's going on in our brains and how to use them best.
No, you and I have talked before about how women are drinking unhealthy amounts of alcohol of late, and now we're learning these drugs might be able to curb some of those cravings. Is there a market there or is there a risk of over prescribing these drugs?
You know, I think at this point right now they can't really be overprescribed simply because we don't have enough supply.
You know.
I think we'll see what happens in a few years. The question, and I think that scientists are interested in it and the companies are interested in, is whether there's a way that these drugs can be used to kind of be a reset. So if you stop taking them, do you stop? We know that weight tends to come back, but you know, does that piece of your brain that tells you like you don't need that second glass of wine or you didn't need it in the first place,
is that kind of resets? So that's still something TBD. But you know, hopefully, hopefully we figure that out in the coming years as more people are taking these drugs and more studies happen.
I know it is to be decided or to be determined, but I have like questions to build upon that because those would be the questions that I would have if my doctor were to prescribe this for me. There's an assumption that if you are prescribed this drug, you will take it regularly, and you will continue to take it, and you won't accidentally miss a dose, and then you might stay on the drug for a long term. So number one, what happens if you do accidentally miss a dose?
And number two what would the long term side effects be as you stay on it? And number three what happens when you're not on it anymore when you discontinue used.
Yeah, well I would just you know, I think it's good for people to remember that for diabetes. Ozmpic has been a prue since twenty seventeen, so we have a lot of data on that, And there's other classes, other kinds of GLP drugs that don't induce the same kind of weight loss that we're seeing with ozempick and wigov and munjar are the other drug that's around that have
been around for even longer. So we have some reassuring data there that like, you can take these for a long time and it's probably safe when it comes to kind of what happens when you go off the drugs.
It's an open question, you know, and I do think the companies are interested in not just studying what happens, how you might could you change the do scene, like have it be less frequent, but also inventing other drugs that maybe are longer lasting or it can help with maintenance versus you know, continuing the weight loss.
So what's the future then of these weight loss slash diabetes slash less alcohol or less addictive type drugs, Like, what's the future of these drugs? Where's this going?
Yeah, I mean it's really interesting to watch because it's changing so fast every week. I feel like we're learning something new about them. But there are a number of other drugs that are in the pipeline, some that have higher levels of weight loss, some that hit on these receptors, plus some other receptors, and I think we're starting to
understand kind of the relationship between all of those. To think about, you know, could you take a drug that you only take once every three months or once every six months. Could you take there's pills that are coming so which I think also could change a landscape. Can that ebody wants to inject something once, you know, a week, so I think, to me, the really big question, and kind of getting back to the alcohol thing, is you know, what are the ripple effects on all the other industries
that could be affected. You know that we just haven't quite wrapped our heads around. People will eat less, people might drink less. You know what are the things we haven't even imagined yet that the shift in our behavior could could induce. You know, it's pretty it's pretty wild.
Right, could an impact, say the industry of gyms going to the gym, hiring a personal trainer, couldn't react all of that one way or another.
Yeah, And we're already seeing it with some of the diet you know, kind of foods and drinks like shakes and things like that. But I think there's some data showing that already people are taking drinking less of those so to TVD. But there's a lot of different things that are unknown, and I'm excited to watch what happens.
Lisa Jarvis is a Bloomberg Opinion columnist covering biotech, healthcare, and the farharmaceutical industry. Now Bloomberg Opinion continues with a look at tipping. There's a new trend that could complicate matters for people who actually rely on those tips. This is Bloomberg.
You're listening to the Bloomberg Opinion podcast. Catch us Saturdays at one and seven pm Eastern on Bloomberg dot com, the iHeartRadio app and the Bloomberg Business App, or listen on demand wherever you get your podcasts.
You're listening to Bloomberg Opinion I Amy Morris. Have you noticed a new trend? You're headed out for coffee or a quick bite, and the establishment encourages you to add a tip to your bill, even if it's a self serve place. Let's talk about what's happening. Bloomberg Opinion columnist Bobby Ghost joins us. Now, what's going on? Everybody wants a little extra?
Well, you've already hinted edit at your introduction. It's this new trend, or accelerating trend if you like, where we as customers are being prompted to give a tip at places where we previously never thought that was necessary. Coffee shops, cinema theaters, even car washes. More generally, the notion is that you give a tip where you can see and feel a service being rendered.
Where did this come from?
Well, it comes.
From a couple of things. One is, of course, that these new machines at the till make it possible. Some of it is attributable to what happened during the pandemic, when Americans people around the world felt in a much more generous mood towards people who were taking the trouble, taking the risk of going to work despite the incredible dangers.
Some of that has just stayed on. The other really interesting contributor to this is unemployment levels in the US are so low that many establishments grocery store for example, are struggling to find staff. And then the normal course of events when you're short of staff and when you're worried about losing staff to your competitors as you raise their salaries. Well, this is one way companies are raising income but passing on the responsibility for that directly to their customer.
So how could this new trend hurt those who need these tips the most.
Well, what's happening is that it's a bit of a bang shot. People are very disgruntled at having to leave tips in so many different and new places that they're becoming a little more stingy in the places where traditionally they were not where they were quite happy to leave tips in restaurants. In poll after poll after pol we are seeing that Americans are now less likely to leave
a tip at a restaurant. And this is a serious problem because in the restaurant industry, most of the people to whom you leave tips, bus boys, servers, barmen, do not get paid a fair minimum wage. Their employers expect the gap between what they're being paid and a Liverpool wage to be filled by customers. And if you're if you are sort of punishing the waiters for let's say Starbucks's fault of charging you tips where you didn't previously give,
that's unfair to the waiters. And it's not it's more than a question of being fair or unfair. It's it's it's a crisis for the restaurant industry. They too are struggling to find people and hold on to people. And if we pay lesson tips, or if we don't tip at all, that makes the restaurant industry the sort of place where nobody wants to work. And in an in an employment market as it is today, there are plenty of other options, and so people don't want to work in restaurants anymore.
Do you think tip creep is here to stay.
As a restaurant goer, I hope not. But there's a bigger problem, which is that the restaurant industry and its wage structure is profoundly.
Unfair.
I think it's time for the restaurant industry to pay its employees a fair wage, a minimum wage to start with, and then if they are struggling to find staff, they should do what other industries do, which is pay better,
give better benefits. They'll have to pass the costs on to me as a customer, but I'm willing to pay that extra price, and if it leads to a situation where at the end of the day, I don't feel obliged to pay a huge tip just to make my server, you know, give my silver a chance to have a fair wage, That's an acceptable situation for me.
Bloomberg Opinion columnist Body goes and that does it for this week's Bloomberg Opinion. We are produced by Eric mollow and you can find all of these columns on the Bloomberg terminal, and we're available as a podcast on Apple, Spotify or your favorite podcast platform. Stay with us today's top stories in global business headlines coming up. I'm Amy Morris, and this is Bloomberg.