January 2012

Insured Buildings in Haiti Still Standing

by Michelle Minton on January 25, 2010

in Insurance, International, Odds & Ends

One could consider it ironic that the buildings in Haiti most likely to receive insurance money are those that experienced the least amount of damage. It is more likely that those buildings experiencing the heaviest amounts of damage during the 7.0 magnitude earthquake had no insurance coverage at all.

However, it is not irony; it’s the logical consequence of profit-minded insurance principles. As a condition of writing policies many insurers require buildings to meet certain standards or building codes in order to mitigate the amount of possible losses. As a result of the codes structures are sturdier and less likely to result in damage and death. While state-run insurance policies might eventually require certain standards, they aren’t incentivized in the same way private insurers are to guarantee that consumers are holding to the building codes and to make sure the codes actually prevent or mitigate against damage. Haiti has no national building code despite its participation in a Caribbean-wide insurance pool for hurricanes and earthquakes

Haiti has no national building code. Risk modeling firm Eqecat of Oakland, Calif., said it expects to find that insured buildings have fared slightly better, because insurers likely insist that structures be reinforced as a requirement for getting coverage.

Eqecat pointed out that poor construction contributed to the heavy losses, with most of the concrete or masonry buildings featuring “little or none of the lateral reinforcing needed for earthquake resistance.”

But Haiti does have government-run insurance via the Caribbean Catastrophe Risk Insurance Facility, an insurance pool to reimburse the governments of Caribbean nations. The problem with government provided insurance is that they are not motivated by profit and are, therefore ,not motivated to reduce losses. Unlike the private insurance companies the CCRIF does not require adherence to building codes as a precondition of coverage. Additionally, Haiti is covered by the CCRIF only up to $8 million while losses are expected to reach into the billions.

The problem in Haiti is that few of the buildings are  covered by private insurance. One obvious reason that Haiti lacks availability of insurance is the long history of political instability.

There is a bright side to the tragedy in Haiti. As noted by Robert Hartwig of the Insurance Information Institute, Haitians can revitalize their insurance market if they adhere to certain codes as they rebuild structures.

At home in America, insurance has been a hot topic for the past year. If we can take anything away from the tragedy in Haiti as we observe their efforts to rebuild, it should be the benefits that accompany the availability of private insurance.

More dirt in the IPCC melting Himalayas scandal

by Michael Fumento on January 24, 2010

in Global Warming

In an update to my blog on the alleged melting of the glaciers atop the Himalayas (and imminent extinction of the yeti), the scientist behind the bogus claim in the 2007 Intergovernmental Panel on Climate Change (IPCC) report claiming the Himalayan glaciers will have melted by 2035 last night admitted it was included purely to put political pressure on world leaders.

Dr Murari Lal also said he was well aware the statement, in the , did not rest on peer-reviewed scientific research.

In an interview with The Mail on Sunday, Dr Lal, the coordinating lead author of the report’s chapter on Asia, said: ‘It related to several countries in this region and their water sources. We thought that if we can highlight it, it will impact policy-makers and politicians and encourage them to take some concrete action.

The claim that Himalayan glaciers would disappear by 2035 relied on magazine interviews with glaciologist Syed Hasnain, which were then recycled into a 2005 report by the warmist World Wildlife Fund. Lal and his team then cited this as their source.

Moreover, the WWF article also contained a arithmetic error. A claim that one glacier was retreating at the alarming rate of 134 meters a year should in fact have said 23 meters – the authors had divided the total loss measured over 121 years by 21, not 121, said the newspaper.

As to the 2035 melting date, it “seems to have been plucked from thin air.”

Which is only right, considering how very thin the air is atop the Himalayas.

Flu Watch Jan. 24, 2010 – Swine flu appears to be sweeping aside seasonal flu

by Michael Fumento on January 24, 2010

in Health and Illness

Reported infections, deaths, hospitalizations all down. Again, though, when adjusted for the time lag they were probably the same as last week. The only thing that still interests me is the percentage of non-swine flu infections. That’s because, as I’ve noted, in countries like Australia and New Zealand, swine flu simply swept the seasonal flu aside. The result was a tremendous reduction in flu deaths as the milder swine flu inoculated people against the deadlier seasonal flu.

I repeatedly predicted we would see the same here and again this week we see evidence of that. Of the infections reported to the CDC labs last week, only four were clearly not swine flu. And here we are in mid-January, approaching what is normally the peak of seasonal flu season (mid-February).

Here’s a report from the Jan. 20 Minneapolis Star-Tribune:

“In ordinary years, the first seasonal flu cases typically show up in December and start mounting in January, said Richard Danila, deputy state epidemiologist. But so far, “there’s been virtually zero” confirmed cases of seasonal influenza, he said. ‘It’s really surprising.’” [Ahem! It wouldn't be if he'd been reading my material!]

Danila said he’s never seen seasonal flu wait this long to make an appearance, adding: “But no one’s willing to say that it won’t come.”

Flu experts speculate the H1N1 virus may end up wiping out other strains of flu, in classic Darwinian fashion.

“Seasonal flu didn’t find a niche and still hasn’t found a niche yet of susceptible people,” Danila said.

The bright side of flood insurance

by Michelle Minton on January 22, 2010 · 1 comment

in Insurance

Some Michigan residents are boiling mad that their mortgage lenders are forcing them to purchase flood insurance. The notifications were sent out to residents as a result of FEMA’s adoption of updated flood maps. There is, however, good news here.

Consumers have options. FEMA is certainly not infallible.  The maps may not be accurate (I know it’s hard to believe) and homeowners can hire their own property surveyors to determine if they are in a floodplain and how likely it is that a flood will occur on their property. With these actions they may be able to avoid the mandatory purchase of flood insurance or at least they can reduce the cost by giving details about the risk of flood (as I wrote in an earlier blog post insurers can charge less when they are more certain of the risks). Additionally, the more residents who assess the risks associated with their property provide more thorough details for their insurance companies which means that these companies can come closer to risk-based-rates for all of their customers and potentially charge less for everyone as the result of higher profits.

In addition, some consumers who have their property surveyed might find out that they are not in a flood zone though they thought they were and had already purchased flood insurance–in which case they can have their premiums refunded from the previous and current year.

On the flip side, some residents who have their properties surveyed might just find out that they are indeed in a flood plain and they may have to purchase flood insurance. But how “bad” is it really when people are forced to calculate and prepare for a hazard that is very likely to occur?

Give Insurers some Credit!

by Michelle Minton on January 22, 2010

in Odds & Ends

Insurance commissioner of Washington State, Mike Kreidler wants the legislature to ban the use of credit scores from the measurements insurers use in determining the rates they charge for home and auto insurance.

“It doesn’t have anything to do with how you drive your car or maintain your home,” said state Insurance Commissioner Mike Kreidler.

While there is actually evidence that low credit scores do correlate with higher risks when it comes to insurance claims (not necessarily that consumers with poor credit are more likely to have accidents, but that they more likely to file claims rather than “eating” the cost), that isn’t the reason that insurers should be allowed to use credit ratings.

The simple fact is that insurance companies succeed or fail (you know, barring a federal bailout of some variety) based on their ability to assess risk and charge the appropriate rates to compensate their consumers while still keeping rates low enough to attract new customers. They utilize any and all information they can to guess as accurately as possible which consumers are likely to file claims and how much they will need. Political appointees or elected officials do not have the same impetus for accuracy when it comes to insurance rates. Their only motivation is to keep their constituents happy long enough to keep them in office.

In the long-run though these happy constituents will see their rates rise, even those with good credit ratings, because if insurers are banned from acquiring the details that they believe get them closer to adequately pricing insurance premiums then they will err on the side of caution–meaning higher than necessary rates for everyone.

Regulation of the Day 103: When Products Are on Sale

by Ryan Young on January 22, 2010

in Deregulate to Stimulate, Economy, Nanny State, Regulation, Regulation of the Day

Two states have regulations for when stores can say their products are on sale. The Boston Globe editorializes:

This is a perfect example of a problem that the market can sort out on its own. If there’s one thing 21st century shoppers don’t lack, it’s information. The task of determining whether a “sale’’ is really a sale is best left to comparison-shopping consumers, not the authorities. And given the popularity of websites dedicated to nothing but price-watching and -comparing, doing so is easier than it has ever been. If a store offers an obviously phony promotion, it will be duly punished by its customers. The state needn’t pile on.

(Hat tip to Jonathan Moore)

Grading Obama’s First Year

by Ryan Young on January 22, 2010

in Deregulate to Stimulate, Economy, Politics as Usual, Regulation, Stimulus to Nowhere

CEI released a comprehensive report card this week on the Obama administration’s first year in office. My contribution is below; the full report card is here. Take a look.

C- Office of Management and Budget – Peter Orszag, Director
Grader: Ryan Young, Journalism Fellow

Spending and deficits are far higher than under President George W. Bush, himself a big spender. But Obama can’t be given all the blame. The bailout and stimulus spending programs that caused much of the fresh red ink got their start under Bush. In a potentially positive regulatory development, the number of pages in the Federal Register decreased from 79,435 in 2008 to 69,676 in 2009. Of course, the contents of those pages matters more than how many of them there are. And on that front, the new administration is business as usual.

Darn! No more “Blessed be the snipers . . .”

by Michael Fumento on January 22, 2010 · 1 comment

in Odds & Ends

A gunsight maker that imprinted Bible verse numbers on its scopes has announced that it will no longer do so, and will also provide clients with the kits to remove the Bible verse numbers from existing scopes. The Michigan-based company, which has a contract to provide up to 800,000 scopes to the U.S. military and provides them to the militaries of other nations as well, prints references to New Testament chapters and verses in code next to the model numbers of its scopes. But it’s caused an uproar among Muslim organizations and advocacy groups for the separation of church and state. Said the leader of one of the latter, “It allows the Mujahedeen, the Taliban, al Qaeda and the insurrectionists and jihadists to claim they’re being shot by Jesus rifles.”

Well, okay. But where were all these people when in both world wars German soldiers wore belt buckles imprinted with “Gott mit uns” (God is with us)?

Will Cass Sunstein stick up for small business, or bless EPA’s legal hair splitting?

by Marlo Lewis on January 21, 2010 · 3 comments

in Energy, Global Warming

Today, Reps. Lamar Smith (R-TX), Sam Graves (R-MO), Trent Franks (R-AZ), and Lynn Westmoreland (R-GA) sent a letter to Office of Information and Regulatory Affairs (OIRA) Administrator Cass Sunstein sharply critical of EPA’s December 7, 2009 finding that “air pollution” from carbon dioxide (CO2) and other greenhouse gases (GHGs) endangers public health and welfare. 

“On the basis of EPA’s endangerment finding,” the legislators warn, “virtually every economic activity undertaken in America stands to come under the thumb of federal regulation.” They explain: “These actions begin with EPA’s and the Department of Transportation’s proposed new light vehicle emission standards, continue through greenhouse gas (GHG) preconstruction and operating permit requirements for stationary sources and extend as far as the mind can contemplate.” They continue: “In these ways, EPA threatens to burden our economy with vastly expanded regulation not contemplated by Congress when it passed the Clean Air Act.” 

Yes, indeed. As I discuss here and here, EPA’s endangerment finding starts a regulatory cascade that could (1) subject tens of thousands of previously unregulated small businesses to Clean Air Act (CAA) Prevention of Significant Deterioration (PSD) pre-construction permitting regulations, (2) subject millions of small businesses to CAA Title V operating permit requirements, and (3) compel EPA to establish national ambient air quality standards (NAAQS) that would effectively require the United States to de-industrialize. The Supreme Court pushed EPA to make the endangerment finding in its April 2007 Massachusetts v. EPA decision.

The four Members of Congress ask OIRA chief Sunstein to make EPA convene a Small Business Advocacy Review Panel to develop and evaluate regulatory alternatives to mimimize the endangerment finding’s impacts on small business. Until and unless EPA does this, the lawmakers say, the endangerment finding should be “withdrawn.”

The representatives acknowledge that EPA’s proposed October 2009 Tailoring Rule  “seeks to delay for a handful of years the imposition of requirements on sources emitting less than 25,000 tons of carbon dioxide per year.” However, this fix is by design temporary, and it is legally dubious, since EPA would be flouting clear statutory language. Under the CAA, entities must obtain a PSD permit in order to construct or modify a facility with a potential to emit 250 tons per year of a CAA-regulated air pollutant, and a Title V permit in order to operate a facility with a potential to emit 100 tons per year.

EPA estimates that if these provisions are enforced as written, the number of entities applying for PSD permits would jump from 280 to 41,000 per year, and the number applying for Title V permits would jump from 14,700 to 6.1 million per year. The flood of permit applications would overwhelm agency administrative resources, the permitting programs would implode under their own weight, construction activity would grind to a halt, and millions of firms would find themselves in legal limbo — all in the midst of the worst economic downturn since the Great Depression.  

It will be interesting to see how Sunstein responds to the lawmakers’ letter. Will he stick up for small business and honor the spirit of the Regulatory Flexibility Act (RFA), or will he bless EPA’s evasive legal semantics? 

Under the RFA, agencies are to convene a small business review panel unless the agency head certifies that the proposed regulation will not have a “significant impact upon a substantial number of small entities.”  In a recent year, each PSD permit on average cost $125,120 and 866 burden hours for sources to obtain (just the paperwork and administrative costs, exclusive of any associated technology investments). The going rate for Title V administrative fees is $43.75 per ton, implying a virtual carbon tax (exclusive of administrative expenses) of $4,375 for a small business emitting 100 tons of CO2 per year. The Tailoring Rule estimates (p. 55338) that if small sources of CO2 must comply with the law as written, rather than as doctored by EPA, they will incur an expense of more than $38 billion just for Title V compliance over the next six years.  A significant economic impact by any standard.

Note also that the $38 billion figure refers just to the direct expenses small firms would incur to comply with Title V. It does not include the reduced output and job losses due to the diversion of resources to regulatory compliance. Nor does it include the loss of investment in firms that, due to their sheer number, face years of delay and uncertainty in obtaining permits to build or operate their facilities.

The endangerment finding is what tees up all these costs and consequences, so you’d think it would be a no brainer that it has ”significant impact upon a substantial number of small entities.”

Well, EPA says otherwise. In the Endangerment Finding (p. 66545), Administrator Lisa Jackson certifies that EPA’s findings “do not in-and-of-themselves” impose new requirements on small entities. Hence, there’s no need for an RFA review panel. Similarly, EPA’s GHG motor vehicle standards proposal (p. 49628) certifies that it would not have a significant impact on a substantial number of small entities, since the standards would apply to automakers, very few of which are small businesses.

By making new cars more costly, however, the rule could adversely affect thousands of auto dealers, most of whom are small businesses. EPA says not a word about that potential impact. More importantly, the GHG motor vehicle standards are what directly trigger the PSD and Title V requirements.

EPA says the Tailoring Rule (p. 55349) won’t have a significant impact on a substantial number of small entities, because it “will relieve the regulatory burden associated the PSD and Title V operating programs for new and modified major sources that emit GHGs, including small businesses.” So EPA acknowledges there is a burden to be relieved — a PSD/Title V burden. Where does that come from?  The endangerment finding and the GHG motor vehicle emissions rule. Yet EPA claims those actions have no impact of any consequence for small business.   

Isn’t legal hair-splitting grand? Of course, the findings “in-and-0f-themselves” regulate nothing — but they compel the adoption of GHG motor vehicle standards under CAA Sec. 202, which then automatically trigger pre-construction permitting requirements under Secs. 160-160 and operating permit requirements under Secs. 501-507.

The endangerment finding also sets the stage for regulation of GHG emissions from motor fuels under CAA Sec. 211, non-road engines and vehicles under Sec. 231, the establishment of GHG new source performance standards (NSPS) for scores of industrial source categories under Sec. 111, and the establishment of economy-wide NAAQS regulation of GHGs under Secs. 107-110.  ”Yes, Your Honor, I pulled the trigger, but I am innocent; the bullet killed the man!”

And if litigation and the logic of the CAA compel EPA to establish NAAQS for CO2 and other GHGs, which could easily qualify as the most expensive rulemaking in history, you can bet your bottom dollar what EPA will say. There’s no significant impact on a substantial number of small businesses, because NAAQS “in-and-of-themselves” don’t regulate anybody. The actual regulation of businesses large and small will be done by the states, through their State Implementation Plans (SIPs). “Once the rockets are up who cares where they come down, that’s not my department,” says Wernher Von Braun.

Small business clearly needs an advocate in the room and at the table whenever EPA deliberates about any regulatory action pertaining to greenhouse gases and CO2. Congress enacted the RFA to protect small business from regulatory excess. Right now it’s not working. Cass Sunstein has an opportunity to ensure that small businesses have a say in regulatory decisions affecting their very survival. He should seize it.

IPCC: “Our bad! Global warming not about to melt Himalayas.

by Michael Fumento on January 21, 2010 · 1 comment

in Global Warming

“The glaciers in the Himalayas are receding faster than in any other part of the world and, if the present rate continues, a large number of them may disappear by 2035 because of climate change.” Such was the lede of one of countless articles about how 1.3 billion Asians were in imminent danger of first flooding and then drought. And that’s not to mention the certain extinction of the abominable snowman.

You didn’t need a Cray computer to figure that this was nonsense, that temperatures would have to more or less instantly soar to incredible heights and stay there for this to happen. (As it turns out, 18 degrees Centigrade.) But people wrote it, read it, and believed it. You’d think a magazine with the name Technology Review would know better, yet its latest issue declares: “The Himalayan glaciers that feed rivers in India, China, and other Asian countries could be gone in 25 years.”

Why did they say it? In part, because it was convenient. And in part because the Intergovernmental Panel on Climate Change (IPCC) said it in its Fourth Assessment Report (2007). Now the IPCC is saying, “Whoopsie!”

In a statement released on Wednesday, the group admitted “poorly substantiated estimates.” More specifically, it appears to have been based on a news story in the New Scientist, a popular science journal, published in 1999. That story, in turn, was based on a short telephone interview with Syed Hasnain, a little-known Indian scientist in Delhi. And Hasnain has since admitted his assertion “speculation” unsupported by any formal research.

The IPCC says it will “probably” issue a formal correction. “Probably?”

But admit it guys, wasn’t it fun while it lasted?

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